Elon Musk’s $56 Billion Tesla Payday Shattered by US Judge
Elon Musk’s $56 Billion Tesla Payday Shattered by US Judge.
Kathaleen McCormick, a judge in Delaware, has determined that Elon Musk is not entitled to a substantial amount of money, even though Tesla shareholders have voted to reinstate it.
A judge determined on Monday that Elon Musk, the chief executive of Tesla, remains ineligible to receive a $56 billion compensation package, despite a shareholder vote six months prior that favored its reinstatement.
The ruling by Delaware's Court of Chancery, presided over by Judge Kathaleen McCormick, follows her earlier decision in January, which deemed the compensation package excessive and subsequently annulled it, a move that took investors by surprise.
This ruling has introduced uncertainty regarding Musk's future with the leading electric vehicle manufacturer. Tesla's board contended that the substantial compensation plan was essential to retain Musk's involvement in the company, a sentiment echoed by Musk himself, who is already recognized as the world's wealthiest individual.
Additionally, McCormick mandated that Tesla compensate the attorneys who initiated the case with $345 million, a figure significantly lower than the billions originally sought.
In court documents, Tesla argued that the judge should acknowledge a subsequent vote in June by its shareholders supporting Musk's pay package, emphasizing his pivotal role in the company's progress and asserting that he had met the milestones outlined when the compensation plan was established.
Tesla initially structured Musk's compensation package in 2017, establishing criteria for Musk to obtain 12 separate tranches of stock options contingent upon the company achieving specific revenue and market objectives. Shareholders overwhelmingly endorsed this package in 2018; however, one investor subsequently filed a lawsuit alleging that the board had been deceptive and that the package was inequitable.
Notable shareholders, including Norway’s sovereign wealth fund and the California state teachers’ retirement system, opposed the compensation plan, but their votes were ineffective.
Upon the package's approval in June, Musk expressed his enthusiasm during a Tesla event, stating, “I just want to start off by saying, hot damn, I love you guys!”
While he has not yet commented on McCormick’s latest ruling, he has previously criticized her and advised other business leaders to avoid Delaware, where the majority of U.S. companies register due to favorable tax regulations. Musk relocated Tesla's headquarters from California to Texas, although the legal proceedings regarding the compensation package continued in front of the Delaware judge.
McCormick had earlier determined that Tesla’s board had engaged in a “deeply flawed” process in assessing Musk’s compensation. McCormick discovered that the board was fraught with personal disputes and comprised predominantly of Musk's close associates, including his former divorce attorney.
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A Delaware court, led by Judge Kathaleen McCormick, has dealt a major blow to Elon Musk by rejecting his $56 billion Tesla compensation package, citing excessive payouts and a flawed approval process. Despite a recent shareholder vote in favor of reinstating the plan, McCormick ruled that Tesla’s board acted improperly, prioritizing Musk's interests over fairness.
Critics argue the package underscores corporate governance failures, with the board dominated by Musk's allies. This ruling not only challenges Musk's leadership but also raises questions about Tesla's prioritization of accountability. The decision further taints Musk's reputation amid growing scrutiny of his business practices.
