Delaware Judge Rejects Musk's $56 Billion Tesla Pay—Again
Key Points:
A Delaware judge has reaffirmed her decision to rescind Elon Musk's $56 billion Tesla pay package despite a June shareholder vote to reinstate it.
The ruling highlights procedural and legal issues, including Musk's control over the pay negotiation process and errors in Tesla’s proxy statement.
Tesla plans to appeal the decision to the Delaware Supreme Court, a process that could take up to a year.
A Delaware judge has once again ruled against Elon Musk's $56 billion Tesla (TSLA) pay package. Chancellor Kathaleen McCormick of the Court of Chancery maintained her earlier decision to overturn the package, citing procedural flaws and Musk's control over the pay negotiations.
McCormick noted that Tesla shareholders’ June vote to reinstate the compensation plan was conducted too late to serve as a "cure-all." She also found that Tesla made material misstatements in its proxy statement, further invalidating the vote.
"The court cannot condone a defeated party creating new facts to revise judgments," McCormick wrote in her opinion.
Tesla's Response and Legal Implications
Tesla criticized the ruling, stating it would appeal the decision. "The ruling is wrong, and we're going to appeal," the company said on X (formerly Twitter).
The appeal to the Delaware Supreme Court could take a year to resolve. Meanwhile, Tesla shares fell 1.4% in after-hours trading.
Gary Black, managing partner of The Future Fund, expressed optimism that a higher court might overturn the ruling, citing the Delaware Supreme Court's more pragmatic approach.
Musk’s Role and Compensation
The compensation plan, which awarded Musk stock options tied to ambitious performance targets, was initially valued at $56 billion but has now grown to approximately $101 billion due to Tesla's surging stock price.
Critics argue that shareholders were not adequately informed about the ease of achieving the performance goals. McCormick had previously labeled the pay package as "an unfathomable sum," 33 times larger than the next-largest executive pay package.
Additional Rulings
The court also ordered Tesla to pay $345 million in attorney fees, significantly less than the $6 billion initially requested. This fee represents one of the largest awards in securities litigation history.
Shareholder Reaction
Many Tesla shareholders voiced disappointment over the ruling, fearing it could jeopardize Musk's commitment to the company. Supporters have argued that Musk’s leadership has been critical to Tesla's success, and his pay package reflects his contributions.
Despite the legal setbacks, Tesla and Musk remain determined to defend the compensation plan, with further legal battles expected in the months ahead.
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