LIVE UPDATES
DELAWARE, United States — A US judge on Monday upheld her decision to reject Elon Musk’s massive $55.8 billion compensation package at Tesla.
The judge however, dismissed an attempt to restore the pay deal through a shareholder vote.
In a court filing, Chancellor Kathaleen McCormick of Delaware’s Court of Chancery ruled that Tesla’s attempt to ratify Musk’s compensation package through a June shareholder vote could not override her January decision striking down the package as excessive and unfair to shareholders.
McCormick found multiple flaws in Tesla’s ratification attempt, including “material misstatements” in documents provided to shareholders about the effect of their vote.
According to McCormick, “The motion to revise is denied.
“The large and talented group of defense firms got creative with the ratification argument, but their unprecedented theories go against multiple strains of settled law."
Reacting in a statement on Musk’s X social media platform, Tesla said it would appeal the verdict.
“Shareholders should control company votes, not judges,” said Musk, in a separate post.
The court also awarded $345 million in attorney fees, significantly less than the $5.6 billion requested by the lawyers of plaintiff Richard Tornetta, a Tesla shareholder.
While acknowledging their calculation method was technically sound under Delaware law, McCormick ruled that such a large award would constitute an excessive windfall.
Recall that in March 2018, shareholders backed the Musk compensation plan that was specifically designed to reward the 53-year-old founder for Tesla’s significant growth.
But in a lawsuit, Tornetta accused the defendants of failing in their duties when they authorized the pay plan and alleged that Musk dictated his terms to directors, who were not sufficiently independent from their star CEO.
He also accused Musk of “unjustified enrichment” and asked for the annulment of a pay program that helped make the entrepreneur the richest man in the world.
During a trial in 2022, Musk countered that investors in Tesla were some of the “most sophisticated in the world” and able to keep tabs on his management.
He said Tesla had been the laughingstock of the auto industry, and it was only the massive success of the company’s Model 3 that turned things around.
The Delaware Court of Chancery has been a pillar of US capitalism for more than a century and is the jurisdiction where roughly two-thirds of American Fortune 500 companies are registered.
Musk on Monday reposted, calling for companies to leave Delaware.
