A Delaware judge has rejected Elon Musk’s $56 billion pay package after denying a motion to revise the ruling on Monday. The decision follows a lawsuit challenging Tesla’s 2018 compensation plan, one of the largest of its kind globally. Shareholders argued the package was improperly approved, marking a key legal win for those questioning the governance of executive pay.
Court Finds Compensation Flawed
The pay package, tied to performance targets rather than a guaranteed salary, faced criticism for being poorly structured. Judge Kathaleen McCormick of the Delaware Court of Chancery had previously described it as ‘deeply flawed’ in a January ruling. According to the judge, the package failed to meet legal standards required for executive compensation and should not have been granted.
Tesla shareholders initially voted in favour of the package during a 2018 shareholder meeting. However, McCormick dismissed the argument that the vote validated the plan, suggesting that shareholder approval alone could not fix its structural deficiencies.
Court Awards $345 Million in Attorney Fees
The court also awarded $345 million in attorney fees to the legal team that challenged Musk’s pay package on behalf of Tesla shareholders. Labelled a ‘total victory,’ this payout reflects the scale of the legal success.
Tesla now faces the choice of paying this amount in cash or issuing stock that could be sold on the open market.
Musk’s Wealth Keeps Growing
Despite the setback, Musk’s personal fortune has surged recently. His net worth increased by $43 billion in recent weeks, buoyed by a 42% rise in Tesla’s stock value.
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