A judge ruled on Monday that Tesla CEO Elon Musk is still not entitled to receive a $56bn compensation package even though shareholders of the electric vehicle company had voted to reinstate it six months ago.
The ruling by the Delaware judge, Chancellor Kathaleen McCormick of the court of chancery, follows her January decision that called the pay package excessive and rescinded it, surprising investors. The decision cast uncertainty over Musk’s future at the world’s most valuable carmaker. Tesla’s board argued the enormous payment scheme was necessary to keep Musk involved in the company, an argument that the billionaire, already the world’s richest man, echoed.
McCormick also ordered Tesla to pay the attorneys who brought the case $345m, well short of the billions they initially requested.
Tesla has said in court filings that the judge should recognize a subsequent June vote by its shareholders in favor of the pay package for Musk, the company’s driving force who is responsible for many of its advances, and reinstate his compensation. Tesla and its shareholders argued that Musk had reached the milestones originally stipulated when the pay package was drawn up.
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Tesla originally devised Musk’s payment package in 2017, setting conditions for Musk to receive 12 different tranches of stock options depending on whether the company hit certain revenue and market targets. Shareholders approved that package by a wide margin in 2018, but one investor filed a suit claiming that the board had been misleading and the package was unfair. Some prominent shareholders such as Norway’s sovereign wealth fund and the California state teachers’ retirement system voted against the pay package to no avail.
When the pay package was approved in June, Musk said in response on stage at a Tesla event: “I just want to start off by saying, hot damn, I love you guys!” He did not immediately respond to McCormick’s most recent decision, but he has lambasted her in the past and urged other business owners to stay away from Delaware, where most US companies file their incorporation paperwork due to friendly tax policies. Musk moved Tesla’s physical headquarters from California to Texas, though the pay package case continued before the Delaware judge.
McCormick previously ruled that Tesla’s board conducted a “deeply flawed” process to determine Musk’s payment.
McCormick found that the board was rife with personal conflicts and stacked with Musk’s close allies, such as his former divorce attorney.