The ruling deemed the Tesla CEO’s pay package excessive and invalid.
Elon Musk got paid minimum wage for 6 years and took Tesla's market value from $55 Billion to $650 Billion. @patrickbetdavid breaks down Elon Musk's insane $56 billion compensation package deal with Tesla. pic.twitter.com/eP0RQVqC7E
— PBD Podcast (@PBDsPodcast) June 4, 2024
A Delaware judge has reaffirmed her earlier decision to nullify Tesla CEO Elon Musk’s $56 billion compensation package, after a recent shareholder vote in favor of reinstatement, according to court documents filed Monday.
Chancellor Kathaleen McCormick of the Delaware Court of Chancery stood firm on her January ruling that deemed the pay package excessive and invalid. The latest decision comes as a blow to Tesla and its shareholders, who, according to earlier court filings, had voted to re-approve Musk’s pay package in June after the January judgment.
In her 101-page opinion, McCormick rejected Tesla’s attempt to “reset” the situation through the June vote.
“Were the court to condone the practice of allowing defeated parties to create new facts for the purpose of revising judgments, lawsuits would become interminable,” she said.
The judge criticized Tesla for making multiple material misstatements in its proxy statement regarding the shareholder vote, asserting that the company could not use the vote as a “cure-all” to justify restoring Musk’s compensation, court documents show.
“Taken together,” the issues with Tesla’s arguments “pack a powerful punch,” McCormick wrote in her ruling.
Tesla’s stock fell 1.4 percent in after-hours trading following the decision, according to market data.
In addition to upholding her previous ruling, McCormick ordered Tesla to pay $345 million in attorney fees to the legal team representing the shareholder plaintiff, which cannot be paid in cash or Tesla stock. This amount, while substantial, falls short of the $5.6 billion initially requested by the attorneys, court documents reveal.
Bernstein Litowitz Berger & Grossmann, one of the law firms representing the plaintiff, said they were satisfied with the ruling.
“We are pleased with Chancellor McCormick’s ruling, which declined Tesla’s invitation to inject continued uncertainty into Court proceedings,” the firm stated.
The case, originally filed in 2018 by shareholder Richard Tornetta, challenged the legality of Musk’s compensation package. Tornetta’s attorneys argued that Delaware law does not allow companies to use ratification votes to overturn court rulings.
