Court Rejects Elon Musk’s Record $56bn Pay Deal for Second Time

Elon Musk’s controversial $56 billion pay package has been rejected by a Delaware court for the second time, dealing a significant blow to the Tesla CEO’s compensation plan.

The ruling follows months of legal battles, despite approval by Tesla’s shareholders and directors earlier this year.

In her decision, Delaware Judge Kathaleen McCormick upheld her earlier ruling from January, stating that the Tesla board had been overly influenced by Musk when approving the pay deal.

The pay package, which dates back to 2018, would have been the largest ever granted to the head of a publicly listed company.

However, Judge McCormick argued that Tesla had failed to demonstrate the fairness of the package, citing concerns over the board’s independence.

In response to the ruling, Musk expressed his frustration on his platform, X (formerly known as Twitter), writing, “Shareholders should control company votes, not judges.”

Tesla, however, immediately announced its intention to appeal the decision, calling the ruling “wrong.”

The company emphasized that if the decision stands, it could shift control away from shareholders and into the hands of judges and lawyers.

Musk, who is the world’s richest person with a net worth of approximately $350 billion, has been vocal about his views on numerous issues.

In the wake of this decision, Tesla’s legal team argued that the shareholder vote in favor of the pay package should be sufficient.

However, the judge disagreed, stating that a simple stockholder vote could not validate such an exceptionally large pay package.

The case has drawn attention to the broader issue of corporate governance, with critics saying it exposes the flaws in the power dynamics between CEOs and their boards.

Experts, such as Charles Elson from the University of Delaware’s Weinberg Center for Corporate Governance, have supported the ruling, noting that the board’s lack of independence and the excessive pay package were significant issues.

Tesla has yet to back down, though, and could look to reconfigure a similar pay structure in Texas, where the company moved its legal base earlier this year.