A Delaware court judge has ruled against reinstating Tesla CEO Elon Musk’s record-breaking $56 billion (£47 billion) pay package.
Despite shareholder and director approval earlier this year, Judge Kathaleen McCormick reaffirmed her January decision, citing undue influence by Musk on the board.
In response to the ruling, Musk posted on X: “Shareholders, not judges, should control company votes.”
Tesla announced plans to appeal the ruling, calling the decision “wrong.”
In a statement on X, the company said, “This ruling, if not overturned, places control of Delaware companies in the hands of judges and plaintiffs’ lawyers rather than their rightful owners – the shareholders.”
Judge Kathaleen McCormick described the $56 billion pay package, introduced in 2018, as potentially the largest ever for a public company CEO. She ruled that Tesla failed to demonstrate the deal was fair and dismissed Tesla’s legal arguments as “creative” but unpersuasive. Despite a 75% shareholder vote in favor of the package in June, McCormick maintained that the approval did not justify the pay’s extraordinary size.
The judge also awarded $345 million in fees to the shareholder who brought the case but rejected their request for $5.6 billion in Tesla shares.
Legal experts suggested that a victory for Musk and Tesla could have weakened Delaware’s conflict of interest laws. Charles Elson of the University of Delaware’s Weinberg Center for Corporate Governance praised McCormick’s reasoning, highlighting concerns about Tesla’s board independence and the outsized compensation package.
Elson speculated that Tesla might attempt to design a similar pay plan under Texas jurisdiction, where the company relocated its legal headquarters earlier this year following the ruling.
