A judge has rejected Elon Musk’s record-breaking $56 billion Tesla pay award for the second time. Judge Kathaleen McCormick upheld her earlier decision, arguing that Tesla board members were too influenced by Mr. Musk when approving the deal.
Legal Battle Over Pay Deal
The Delaware court ruling follows months of legal disputes, despite Tesla shareholders and directors approving the package in 2018. Judge McCormick ruled the pay deal, the largest ever for a listed company’s CEO, was unfair. Tesla failed to prove the package met reasonable standards, she said.
Reacting to the decision, Mr. Musk posted on X: “Shareholders should control company votes, not judges.” Tesla announced plans to appeal, calling the decision “wrong” and arguing it undermines shareholder authority.
Tesla stated on X, “This ruling, if not overturned, means judges and plaintiffs’ lawyers run Delaware companies instead of shareholders.”
Shareholder Vote and Wider Implications
In June, 75% of Tesla shareholders voted in favor of the pay deal. However, the judge found that even shareholder approval could not justify the package under the circumstances. She also awarded the shareholder who brought the case $345 million in legal fees, rejecting their request for $5.6 billion in Tesla shares.
Charles Elson, a governance expert, supported the ruling. “The board wasn’t independent, the process was dominated by Mr. Musk, and the package was excessive,” he said.
The decision safeguards Delaware’s conflict-of-interest rules, which protect all investors, not just minorities. Experts believe Tesla might seek a similar pay deal in Texas, where the company recently moved its legal base.
Elon Musk, who leads Tesla, SpaceX, and X, remains the world’s richest person with a net worth of $350 billion. His influence could grow further as Donald Trump, the president-elect, appointed him to lead a new federal agency. The agency, the Department of Government Efficiency, aims to reduce bureaucracy and restructure federal agencies.