The ruling comes after a lawsuit brought by a Tesla shareholder, Richard Tornetta, who challenged Musk’s pay package in 2018. Already in January McCormik had established that the billionaire could not be entitled to the historic package awarded by the company’s board of directors. According to the judge, the company bonus would have been imposed by Musk himself on the managers.
Elon Musk does not receive a cash salary or bonus for his work at Tesla, he instead earns through stock option packageswhich allow him to buy millions of company shares for a fraction of their market price. His compensation package consists of 303 million Tesla stock options, and at the moment it is “the largest in the history of humanity”. But a new ruling has called into question the multi-billion dollar fee.
Delware Judge Kathaleen St. Jude McCormick Monday denied super pay from 55.8 billion of dollars, approved instead by the board of Tesla shareholders. Musk’s package was initially worth it 56 billion dollars, but it is now valued at more than 101 billion dollars after Tesla’s stock price rose more than 40 percent following Donald Trump’s victory in the November 5 US presidential election. According to the judge, the company must now revoke the salary package.
Tesla on X criticized McCormick’s ruling: “A Delaware judge just overturned the will of the absolute majority of shareholders who own Tesla and who voted twice to pay Elon Musk what he’s worth. The court’s decision is wrong and we will appeal.” Elon Musk also on X then added: “It is the shareholders who decide, not the judges!“.
The long war against Musk’s super pay
The ruling comes after a lawsuit filed by a Tesla shareholder, Richard Tornettawho challenged Musk’s pay package in 2018. Tesla approved the stock option packages in 2017, setting the conditions for Musk to receive 12 different tranches. A year later Tornetta sued Musk and the board of directors to prove that the CEO had used his power over Tesla’s board of directors to obtain a package of “outsized compensation“.
Already in January McCormik had established that the billionaire could not be entitled to the historic package awarded by the company’s board of directors. According to the judge, the company bonus would have been imposed by Musk himself on managers. Musk’s lawyers attempted to overturn McCormick’s decision, leveraging the second shareholder vote that ratified the pay package in June, but on December 2 the motion was denied.
McCormick’s decision
According to McCormick there is none legal precedent to overturn the January ruling, “if the courts decide to allow the defeated parties to create new facts in order to review sentences, legal cases risk becoming interminable.”
The judge then added: “Although the package was once again ratified by the majority of shareholders that doesn’t mean Musk’s record payday is in the best interest of shareholders.” He added: “The large and talented group of defense law firms has proven creativity with the ratification argument, but their unprecedented theories go against it multiple strands of consolidated law“.
McCormick also ordered Tesla to pay 345 million dollars to the lawyers who prosecuted the case, the figure is significantly lower than the 6 billion dollars initially requested, but remains one of the bigger compensations never paid in securities litigation.
