Elon Musk, CEO of Tesla, has lost his attempt to reinstate a $56 billion pay package awarded to him in 2018.
On Monday, Delaware Chancery Court Judge Kathaleen McCormick upheld her earlier ruling that the record-breaking compensation plan was improperly granted. The decision marks a major setback for Musk and Tesla, who have already announced plans to appeal.
Judge Rules $56 Billion Tesla Pay Plan Invalid Due to Flawed Approval
The pay package, tied to Tesla's stock performance, was the largest ever awarded to a US public company executive. However, the court found the process leading to its approval deeply flawed.
Judge McCormick stated that Musk had exerted too much control over Tesla's board, effectively dictating the terms of his own compensation.
She also dismissed Tesla's efforts to validate the package through a shareholder vote earlier this year, stating that such actions could not reverse a prior court ruling, CNBC said.
The case originated from a lawsuit filed by Tesla shareholders, who argued that the massive payout unfairly enriched Musk and breached the board's fiduciary duties.
After the court initially voided the package in January 2024, Tesla held a shareholder vote in June, seeking to ratify the pay plan. However, McCormick ruled that the vote could not remedy the flaws in the original approval process.
The ruling also included a $345 million attorney fee award for the legal team representing the shareholders. The plaintiffs' attorneys welcomed the decision, emphasizing its importance in holding corporate leaders accountable.
Musk Slams Court Ruling as 'Absolute Corruption,' Plans to Appeal Tesla Pay Decision
Musk responded to the ruling with frustration, describing it as "absolute corruption" in a post on X, the social media platform he owns. Tesla echoed his dissatisfaction, confirming their intent to challenge the decision.
This legal loss adds to Musk's broader conflicts with Delaware courts. Earlier this year, following an unfavorable decision, Musk criticized the state's legal system and moved Tesla's incorporation to Texas, where its headquarters are now located.
His aerospace company, SpaceX, has also shifted its incorporation to Texas.
According to CBS News, despite this setback, Musk's wealth continues to grow. Tesla's stock has surged in recent weeks, pushing his net worth to over $343 billion.
His Tesla shares alone are estimated to be worth $150 billion, ensuring Musk remains one of the richest individuals in the world.
The court's decision underscores ongoing debates about executive compensation, corporate governance, and the balance of power between CEOs and their boards. For now, Musk's efforts to overturn the ruling have been halted, but the battle over his pay package is far from over.
