Tesla must pay $345M in legal fees after Musk’s pay rejection.
Elon Musk holds a town hall meeting with Pennsylvania voters in Lancaster LANCASTER, PA – OCTOBER 26: SpaceX and Tesla founder Elon Musk speaks at a PAC town hall meeting in Lancaster, Pennsylvania, on October 26, 2024. Musk has donated more than $75 million to PAC, which he co-founded with other Silicon Valley venture capitalists and tech businessmen to support Republican presidential candidate and former U.S. President Donald Trump. Samuel Corum/Getty Images
Despite support from Tesla and shareholders, a Delaware judge has ruled for the second time that Elon Musk is not entitled to a $56 billion pay package initially approved by the electric car company.
Delaware Chancery Court Judge Kathleen McCormick made the decision after shareholders voted in June to reinstate the pay package. She ruled the pay package was excessive and overturned the decision. The ruling continues to leave Musk’s future and compensation at Tesla uncertain, as the pay package was rescinded earlier this year.
In response, Tesla disagreed with the ruling and said that corporate decision-making should be determined by shareholders rather than judges and courts. According to Reuters, the electric car company will not back down and intends to appeal the ruling, and the case may take up to a year to resolve.
To be clear, although Tesla shareholders voted in favor of the plan, the judge ruled that the vote could not retroactively restore the pay. McCormick said the pay plan was deeply unfair to shareholders because the board failed to rein in Musk during the negotiation process.
Elon Musk’s Pay Package
One of the reasons for Musk’s $56 billion compensation package is stock options tied to Tesla’s achievement of ambitious performance targets in 2018. In fact, its value has soared to about $101 billion in some quarters due to Tesla’s soaring stock price. Musk’s supporters say his leadership and success at Tesla justify the compensation package, while opponents say it is unreasonable.
In addition to the court’s rejection of the multi-billion dollar compensation package, the court also ordered Tesla to pay the plaintiffs $345 million in legal fees. Although Musk had expected a huge award, this is one of the largest fee awards in securities litigation, according to CBC.
Musk took to social media to voice his displeasure with the ruling, condemning the judge and calling for the company to re-register in states such as Texas, where corporate governance laws are more likely to favor executives. However, it is worth noting that even with the current legal battles, Musk’s influence over Tesla and other businesses has not diminished.