La legal battle on Elon Musk's Record Pay Continues. For the second time in a year, a Delaware court has $55,8 billion pay package rejected approved by the board of directors of Tesla for its CEO. The judge Kathaleen St. Jude McCormick ha January sentence confirmed, who had defined the super pay as “unfair” and “the result of a flawed procedure”. Tesla has announced that it will appeal against the decision. Furious Musk, “the shareholders decide, not the judges!”.
Musk, a record bonus: the origin of the dispute
Musk's compensation plan, which would have made him the world's highest-paid CEO, was initially approved by Tesla shareholders in 2018. The proposal called for Musk to receive a share package, for a total value that could have exceeded 55 billion dollars, provided that Tesla achieved a series of objectives related to the growth and market value of the company. Over the years, the approval of this package has sparked controversy, but the real legal battle erupted in 2022, when some shareholders have taken the case to court, believing that the remuneration was exaggerated and unreasonable.
During the trial, it emerged doubts on the fact that Tesla's board of directors was truly independent. Many of the board members are tied to Musk by family and personal ties, including his brother Kimbal. This composition has raised questions about transparency and decision-making autonomy, giving rise to the belief that the decisions made by the board were influenced by the founder's wishes. And so, finally, in January 2024, the Delaware court ordered the cancellation of what it calls "potentially the largest package in the history of the markets" and the return of the funds.
Shareholders' approval in June
Despite the legal battle, In June 2024, shareholders voted in favor of the compensation package, considering it a just reward for the success that Musk brought to Tesla, with an extraordinary increase in the market value of the company. At that point, Musk celebrated on social media, declaring that he had won by “wide margins”. The favorable vote of the Tesla general assembly did not, however, automatically guarantee the arrival of the package of shares, as it was necessary to wait for the new ruling.
Meanwhile, Tesla has confirmed the relocation of its operational headquarters from Palo Alto, California, to Austin, Texas. A move that was seen as part of a cost-cutting strategy and closer proximity to a more favorable tax environment for the company.
Delaware Judge: “No to Review”
Judge McCormick ruled that Tesla’s attempt to ratify Musk’s compensation package through a shareholder vote in June cannot overturn its January decision to reject the package. The judge also found “material inaccuracies” in documents provided to shareholders about the effect of their votes.
"The motion for review is rejected“, wrote McCormick, who said that “the large and talented group of defenders has had a field day with the ratification argument, but their unprecedented theories run counter to multiple established rules of law.”
Tesla to Appeal, Musk: "Shareholders Decide, Not Judges"
In response to the decision, Musk has protested strongly. “Shareholders decide, not judges!” he wrote on X, sharing a Tesla post calling the ruling “wrong.”
Musk added that this decision threatens the right of shareholders to run their own companies. “A Delaware judge just overruled the will of an absolute majority of Tesla shareholders, who voted twice to pay Elon Musk his full value. The The court's decision is wrong and we will appeal“, Musk said.
“If this ruling is not overturned, it means that judges and plaintiffs’ lawyers are running Delaware corporations rather than their rightful owners: the shareholders.”
Tesla accused the court of a excessive intervention in company management, arguing that judges and plaintiffs' lawyers are replacing shareholders in crucial decisions. The company will appeal.
