A U.S Judge has upheld her decision to strike down Tesla CEO Elon Musk’s $55.8 billion compensation package, rejecting an attempt to ratify the pay deal through a shareholder vote earlier this year.
Chancellor Kathaleen McCormick of Delaware’s Court of Chancery ruled that Tesla’s June shareholder vote to approve Musk’s package could not override her January decision, which deemed the plan excessive and unfair to shareholders.
In her court filing, McCormick cited “material misstatements” in Tesla’s documents presented to shareholders about the impact of their vote.
“The motion to revise is denied,” she wrote, adding that the arguments presented by Tesla’s defense firms were unprecedented and went against established legal principles.
In response, Musk, using his X social media platform, criticized the ruling, stating, “Shareholders should control company votes, not judges.”
Tesla also announced plans to appeal the decision.
The court also addressed attorney fees for the case, awarding $345 million to the lawyers of Richard Tornetta, the Tesla shareholder who filed the suit.
This amount was significantly lower than the $5.6 billion requested by Tornetta’s legal team, with McCormick calling the higher figure an excessive windfall despite the calculation being technically sound under Delaware law.
The legal battle stemmed from allegations that Musk’s pay package, approved by shareholders in 2018, was unduly influenced by Musk himself and failed to meet proper governance standards.
Tornetta argued that Musk dictated terms to directors who were not sufficiently independent, leading to his “unjustified enrichment.”
Musk defended the package during a 2022 trial, asserting that Tesla’s success was due to his leadership and the breakthrough of the Model 3 vehicle.
He claimed no direct involvement in negotiating the compensation plan, which he said was intended to incentivize him amid Tesla’s challenging years.
The Delaware Court of Chancery, where Tesla is incorporated, has long been a cornerstone of U.S. corporate law. Following the ruling, Musk reposted calls on X for companies to reconsider their incorporation in Delaware.
