A judge in the United States has upheld a decision to deny Tesla CEO Elon Musk a multibillion-dollar pay package despite shareholders voting to restore the compensation deal. The decision was made by Chancellor Kathaleen St Jude McCormick of Delaware’s Court of Chancery, who found that there was no legal precedent to reverse her earlier ruling voiding the pay deal. The judge stated that the board of Tesla was too close to Musk and had not adequately protected shareholders’ interests.
McCormick also mentioned that Tesla had made “material misstatements” to shareholders about the effects of their vote to reinstate Musk’s pay deal. As a result, Tesla shares dropped in after-hours trading following the ruling. McCormick rejected a request for $5 billion in lawyer fees and instead granted $345 million to plaintiff Richard Tornetta, a Tesla shareholder.
After the decision to block the deal earlier in the year, Tesla shareholders in June voted to reinstate the package. Tesla has announced that they will appeal the decision, stating that the court ruling was “wrong” and that judges and plaintiffs’ lawyers are running Delaware companies rather than the shareholders. Musk also expressed his agreement with a post calling the ruling “corrupt” and described McCormick as an “activist posing as a judge”.
Musk’s 2018 pay deal involved being paid in Tesla stock each time the company reached certain goals instead of receiving a salary. His compensation was valued at $56 billion at the peak of Tesla’s valuation in late 2021 but has fluctuated over the years based on the company’s stock price.
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