A Delaware judge has ruled that Tesla cannot grant CEO Elon Musk a $56 billion compensation package. Musk is expected to seek a similar-sized replacement plan. Judge Kathaleen McCormick ruled the vote could not retroactively legitimize the compensation package. McCormick wrote, “Even if a stockholder vote could have a ratifying effect, it could not do so here.”
In this gallery, we look into the ruling.
Musk could appeal the ruling to the Delaware Supreme Court, a process that may take a year. The case involves rare legal issues, adding uncertainty to the outcome.
Tesla’s board might craft a new pay plan, but it would be costly. A similar-sized plan could trigger significant accounting, tax, and legal challenges for the company. Musk may settle the lawsuit and accept a smaller package, though his history suggests he prefers litigation.
The court awarded $345 million in legal fees to the firm representing shareholders who sued to void the plan. Attorneys representing the plaintiff said, “We are pleased with Chancellor McCormick’s ruling, which declined Tesla’s invitation to inject continued uncertainty into Court proceedings and thank the Chancellor and her staff for their extraordinary hard work in overseeing this complex case.”
McCormick wrote, “Were the court to condone the practice of allowing defeated parties to create new facts for the purpose of revising judgments, lawsuits would become interminable.”
After the ruling, Musk criticized Delaware’s legal system and moved Tesla’s incorporation to Texas following a shareholder vote in June. Musk wrote, “Never incorporate your company in the state of Delaware.”
Despite the setback, Musk’s net worth has surged by $43 billion in recent months with his Tesla holdings now worth nearly $150 billion