Tesla CEO Elon Musk Loses Bid to Reinstate $56 Billion Pay Package
INTRODUCTION
Tesla CEO Elon Musk has lost his bid to reinstate his $56 billion pay package after a Delaware judge upheld a previous ruling that declared the compensation plan to be improperly granted. Musk has expressed intentions to appeal the decision, calling the ruling “absolute corruption.”
KEY POINTS
Court Ruling on Pay Package
- Delaware Judge’s Decision:
In a ruling on Monday, Chancellor Kathaleen McCormick affirmed her January decision to void Musk’s pay package, which was the largest in U.S. corporate history. She cited that Musk, as the controlling figure at Tesla, had dictated the terms of his compensation without proper negotiation from the board.- Flawed Process: McCormick described the process leading to the approval of Musk’s pay plan as “deeply flawed” and ruled that it was not a fair decision-making process.
Shareholder Vote and Appeal Attempts
- Tesla’s Shareholder Vote:
After the initial ruling, Tesla held a shareholder vote in June 2023, attempting to ratify the pay package. Musk’s legal team pushed for a reversal of the court’s opinion, citing the results of this vote. However, the judge rejected the argument, stating that shareholder votes cannot retroactively alter the fairness of the original compensation plan.- Court’s Stance: McCormick dismissed the argument that a new vote could change the outcome, calling such efforts an attempt to revise facts for the sake of litigation.
Attorney Fees and Legal Costs
- Attorney Fees Awarded:
As part of the ruling, the judge approved a $345 million attorney fee award for the lawyers who successfully challenged the pay package on behalf of Tesla shareholders.- Plaintiffs’ Satisfaction: The law firm representing the plaintiffs expressed satisfaction with the ruling, praising the judge’s work and the successful outcome for Tesla shareholders.
Musk’s Reaction and Financial Outlook
- Musk’s Response:
Musk expressed outrage over the ruling on X (formerly Twitter), calling the decision “absolute corruption” and urging others to avoid incorporating companies in Delaware. He also continued to criticize the Delaware court system, a sentiment he has previously expressed.- Financial Impact: Despite the legal loss, Musk’s wealth has grown significantly, with his net worth rising by over $43 billion since November 2020. Tesla shares have surged 42% in recent weeks, contributing to his financial gains.
- Stock Value: Musk still holds significant Tesla stock, which is valued at around $150 billion based on the current stock price. His 2018 pay package, excluding stock options, could now be worth an estimated $101.4 billion.
CONCLUSION
Musk’s bid to reinstate his controversial $56 billion pay package was denied by a Delaware court, with the judge reaffirming that the compensation was improperly granted. While Musk plans to appeal, he has seen significant growth in his wealth, largely due to a recent surge in Tesla stock. The case highlights the ongoing legal battles surrounding Musk’s compensation and corporate governance issues at Tesla.
