A U.S. judge has reaffirmed her decision to reject Elon Musk's $55.8 billion compensation package from Tesla, dismissing an attempt to restore the pay deal through a shareholder vote.
Chancellor Kathaleen McCormick of Delaware’s Court of Chancery ruled that Tesla's June vote to ratify the compensation package could not overturn her earlier January ruling that deemed the package excessive and unfair to shareholders.
In her court filing, McCormick identified several flaws in Tesla’s ratification attempt, including “material misstatements” in the documents provided to shareholders regarding the implications of their vote. “The motion to revise is denied,” she stated.
In response to the ruling, Tesla announced plans to appeal. Musk expressed his frustration on social media, stating, “Shareholders should control company votes, not judges,” and criticized McCormick as an "activist posing as a judge."
The court also awarded $345 million in attorney fees to the plaintiff, Richard Tornetta, a Tesla shareholder, which is significantly lower than the $5.6 billion requested by his legal team.
While acknowledging that the fee calculation method was technically valid under Delaware law, McCormick determined that such a large sum would constitute an excessive windfall.
Originally approved by shareholders in March 2018, Musk's compensation plan was designed to reward him for Tesla’s growth.
Tornetta's lawsuit alleged that Musk had undue influence over the board and accused him of “unjustified enrichment.”
During a trial in 2022, Musk defended himself by stating that Tesla investors were sophisticated enough to monitor his management and insisted he did not dictate terms for his pay package.
