A judge has rejected Elon Musk’s record $56 billion pay package for a second time. The Delaware court ruling follows months of legal debates despite prior approval from Tesla shareholders and directors.
Board’s Influence Raises Concerns
Judge Kathaleen McCormick upheld her earlier decision, arguing that Tesla’s board members were overly influenced by Musk when they set the pay package. She stated that Tesla had not proven the compensation, awarded in 2018, was fair.
Tesla responded strongly, calling the ruling “wrong” and vowing to appeal. The company argued the decision undermines shareholders’ authority, stating, “Judges and plaintiffs’ lawyers shouldn’t run Delaware companies instead of shareholders.”
Musk voiced his disapproval on X, saying, “Shareholders should control company votes, not judges.”
Shareholder and Legal Challenges
Although 75% of Tesla shareholders approved the pay package in 2018, Judge McCormick ruled that this vote couldn’t justify such an extraordinary payout. She described Tesla’s legal arguments as “creative” but insufficient.
The court also ordered Tesla to pay $345 million in fees to the shareholder who brought the lawsuit. However, the judge denied their request for $5.6 billion in Tesla shares.
Observers noted that ruling in Musk’s favor could have weakened Delaware’s corporate governance laws, which aim to protect investors from conflicts of interest. Charles Elson, a governance expert, supported the judge’s reasoning. “The board wasn’t independent, the process was dominated by Musk, and the package was far from reasonable,” he said.
Musk’s Expanding Influence
Musk, the world’s richest person with an estimated $350 billion fortune, continues to wield significant influence. Recently, President-elect Donald Trump selected Musk to lead a new Department of Government Efficiency (DOGE). The department aims to reduce bureaucracy and cut government waste.
Tesla may attempt to restructure a similar pay deal in Texas, where the company relocated its legal base earlier this year. However, the controversy over Musk’s compensation highlights ongoing debates about executive pay and corporate governance.
