Delaware judge rejects request to return Musk’s $56 billion Tesla payout Reuters
Written by Tom Hals
WILMINGTON, Delaware (Reuters) – A Delaware judge ruled on Monday that Tesla (NASDAQ: ) CEO Elon Musk still can’t get a $56 billion compensation package despite the electric car company’s shareholders voting to reinstate him.
The decision by the judge, Chancellor Kathaleen McCormick (NYSE: ) of the Court of Justice, follows her January ruling that called the pay package excessive and overturned it, surprising investors, and casting doubt on Musk’s future at the world’s most important automaker.
Musk did not immediately respond to an emailed request for comment.
Tesla said in court papers that a judge should uphold a June shareholder vote in favor of paying Musk, the company’s executive responsible for much of its development, and restore his compensation.
McCormick also ordered Tesla to pay the lawyers who brought the suit $345 million, far short of the $6 billion they had originally requested.
Shareholders also flooded the court with thousands of letters saying that the January decision increased the chances of Musk leaving Tesla or developing other products such as artificial intelligence outside of Tesla.
Attorneys for shareholder Richard Tornetta, who sued in 2018 to challenge Musk’s compensation package, had argued that Delaware law does not allow the company to use a ratification vote to change the decision in the case.
McCormick in January found that Musk improperly controlled the 2018 board process to negotiate a pay package. The board had said that Musk deserved the package because he had met all the ambitious targets for market value, revenue and profit.
But the judge criticized Tesla’s board for “seeing it” to Musk, saying the compensation plan was proposed by a board whose members had a conflict of interest because of their personal and financial ties to him.
After the January ruling, Musk criticized the judge on his social media platform X and encouraged other companies to follow Tesla’s lead and re-incorporate in Texas from Delaware, although it is unclear if any companies have done so.
The judge in his January decision called the payment “the largest compensation scheme ever – an unfathomable sum.” It was 33 times larger than the next largest compensation package, which was Musk’s 2012 pay plan.
Musk’s 2018 pay package gave him stock grants worth about 1% of Tesla’s shares each time the company achieved one of 12 of its performance and financial growth targets.
Musk did not receive any guaranteed salary. Tornetta argued that shareholders were not told how easily the goals would be achieved if they voted on the package.
