A judge has ruled that Tesla chief executive Elon Musk’s unprecedented $56 billion (£47 billion) pay award will not be reinstated.
The ruling from the Delaware court follows several months of legal disputes, which occurred even after the company received approval from both shareholders and directors during the summer months.
Judge Kathleen McCormick reaffirmed her January ruling, asserting that Mr Musk had unduly swayed board members.
In response to the ruling, Mr. Musk expressed his views on X, stating, “Shareholders should control company votes, not judges.”
Tesla has announced plans to appeal the ruling, asserting that the decision was “wrong”.
In a post on X, the electric car company expressed concern, stating, “This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners – the shareholders.”
Judge McCormick stated that the compensation package would have represented the highest amount ever awarded to the chief executive of a publicly traded company.
A representative stated that Tesla did not successfully demonstrate the fairness of the pay package, which originated in 2018.
Elon Musk, the CEO of X (previously known as Twitter), SpaceX, and Tesla, is the world’s wealthiest individual. According to the Bloomberg Billionaires Index, his net worth is approximately $350 billion.
He has leveraged his platform to express his opinions on a wide range of issues, and his prominence appears poised to increase further in the wake of Donald Trump’s victory in the 2024 US presidential election.
The president-elect has appointed Mr Musk to head the newly established Department of Government Efficiency, informally referred to as Doge, echoing the popular dog-related meme.
Former President Trump has stated that Doge will assist the administration in “dismantling Government Bureaucracy, slash excess regulations, cut wasteful expenditures and restructure Federal Agencies.”
“An impressive combination.”
In June, a vote among Tesla shareholders regarding the payment garnered a 75% approval. However, a judge expressed disagreement with the size of the pay, despite acknowledging the “creative” arguments presented by Tesla’s legal team.
“While a stockholder vote may possess the potential for a ratifying effect, such an outcome is not applicable in this instance,” she stated.
A judge has determined that the Tesla shareholder who initiated the lawsuit against the company and Elon Musk will be awarded $345 million in fees. However, the request for $5.6 billion in Tesla shares has yet to be denied.
Observers noted that a ruling favouring Mr. Musk and Tesla could undermine conflict of interest laws in Delaware.
Charles Elson of the University of Delaware’s Weinberg Centre for Corporate Governance emphasised that conflict rules should safeguard the interests of all investors rather than focus solely on minority investors.
Mr. Elson expressed that Judge McCormick’s opinion was thoroughly reasoned.
“The board lacked independence, the chief executive heavily influenced the process, and the compensation package exceeded reasonable limits,” he stated. “This combination is certainly noteworthy.”
Mr Elson indicated that Tesla would likely attempt to establish a comparable compensation package in Texas following the company’s relocation of its legal headquarters earlier this year in response to the pay ruling.
