Elon Musk’s pay package for serving as Tesla’s CEO has been rejected by a Delaware court despite being approved by the company’s shareholders in June. The pay package is now worth around USD101 billion based on Tesla’s closing share price on Monday (December 2, 2024) and is made up of 303 million stock options.
Delaware chancery court chancellor Kathaleen McCormick previously threw out the pay package in January this year when it was worth around USD56 billion. At the time, McCormick ruled in favour of the main shareholder in the suit who challenged the package, arguing that Musk and the Tesla board “bore the burden of proving that the compensation plan was fair, and they failed to meet their burden,” reports CNN.
Musk’s legal team had attempted to reverse McCormick’s decision in January after the 2018 pay package was re-approved by 84% of shares (not held by Musk or his brother, Kimbal Musk) in June. For her latest decision, McCormick explained that although the package was once again ratified by a majority of shareholders in June, that didn’t mean Musk’s record-breaking pay package was in the shareholders’ best interests.
Shareholders should control company votes, not judges https://t.co/zRsWGjC2hG
— Elon Musk (@elonmusk) December 3, 2024
“The large and talented group of defence firms got creative with the ratification argument, but their unprecedented theories go against multiple strains of settled law,” she said. Unlike traditional structures, Musk’s package contains no cash salary or bonus, with his wealth being made through packages of stock options that allow him to purchase millions of Tesla shares for a fraction of their market price.
“There were undoubtedly a range of healthy amounts that the board could have decided to pay Musk. Instead, the board capitulated to Musk’s terms and then failed to prove that those terms were entirely fair,” said McCormick. As part of Monday’s opinion, McCormick approved a USD345 million attorney fee award for the lawyers who successfully sued on behalf of Tesla shareholders in order to void Musk’s pay plan
Naturally, Musk took to X (formerly Twitter) to voice his opinion following the decision, saying, “shareholders should control company votes, not judges.” Tesla’s X page also had its own posting that read, “this ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners – the shareholders.”
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Elon will get Trump to help him get the 56 billion pay check.
I forgot to give out 1 Billion for that judge to close both eyes. Fire that stupid accountant and find me a runner!
Why go Delaware? Go Texas or Kentucky ka.
I don’t like Texas Chicken and I hate KFC. Where else can I go?
because shareholders can be bought.. give each one 500Mil to vote, still left a bunch for elon.. but i think the real story is the judge is Elon’s ex, and being Elon, his is an arse..
My accountant forgot to pay her off.