At Tesla's annual meeting in June, the company's shareholders endorsed CEO Elon Musk's $56 billion pay package, but it appears that Musk may not receive his compensation after all.
Delaware Judge Kathaleen McCormick first struck down Musk's pay package in January, writing in a The 200-page decision that Musk's lawyers “were unable to prove that the shareholder vote was fully informed because the proxy statement inaccurately described key directors as independent and misleadingly omitted details about the process.”
On Monday, it upheld the January decision in one Document of 103 pagespointing out that even though Tesla shareholders approved the plan in June by one wide marginthe measure was not enough to ratify Musk's salary.
A Tesla shareholder, resident of Pennsylvania Richard Tornetta, sued Musk in 2018 over the wage settlement, setting off the years-long legal battle that culminated in Monday's ruling.
Musk's lawyers cannot change the outcome of a post-trial ruling based on evidence that came to light after the trial, McCormick wrote. In other words, the shareholder vote does not have the power to confirm Musk's payment.
Tesla tweeted on X on Monday that “the court's decision is wrong and we will appeal.” The company said the decision creates a new standard for judges and lawyers to run Delaware companies instead of shareholders.
Musk retweeted Tesla's post and added: “Shareholders should control company votes, not judges.”
Shareholders should control company votes, not judges https://t.co/zRsWGjC2hG
— Elon Musk (@elonmusk) December 3, 2024
McCormick also awarded the lawyers who fought against Tesla an award of $345 million in cash or Tesla stock. The group first asked billions of dollars in fees.
Musk's compensation package was initially approved by a majority of Tesla shareholders in 2018. It gave Musk the option to buy hundreds of millions of Tesla shares at a predetermined price if Musk led Tesla to reach certain financial goals.
According to him, it would be “the largest executive compensation award in the history of the public markets.” McCormick's Monday Opinion.
Related: Days after layoffs, Tesla pushes shareholders to approve Elon Musk's $56 billion pay package