Elon Musk's $55.8 Billion Compensation Plan Rejected Again
In a significant legal setback for Tesla and its CEO Elon Musk, a Delaware judge has once again rejected a $55.8 billion compensation package that was approved by 72% of the automaker's shareholders. This ruling, issued on December 2, 2024, marks the second time Judge Kathaleen McCormick has invalidated this compensation plan, which was initially approved during the company's 2018 annual general meeting (AGM). The judge previously ruled against the plan in January, citing concerns over its approval by a committee composed entirely of Musk's associates.
Legal Context and Shareholder Reactions
The judge's decision stems from a lawsuit filed by a Tesla shareholder who argued that the compensation package lacked legal validity despite shareholder approval. Judge McCormick emphasized that while the original judgment did not prohibit Musk from receiving compensation, Tesla and Musk had the opportunity to propose a new, fair plan but instead attempted to revalidate the same package using ambiguous interpretations of Delaware law. In her latest ruling, she expressed disappointment that they did not take the opportunity to amend the compensation structure.
In response to the ruling, Tesla announced its intention to appeal, with Musk publicly stating that “shareholders should control the votes of companies, not judges.” This sentiment reflects ongoing tensions between corporate governance and judicial oversight in matters of executive compensation.
Financial Implications and Future Outlook
Following the court's decision, Tesla shares experienced a slight decline of over 1% in electronic trading after the market closed. Additionally, the judge awarded $345 million in legal fees to the shareholder's attorney, Gregory Varallo, further complicating the financial landscape for Tesla. As Musk continues to navigate this legal challenge, he remains engaged in broader discussions about deregulation and potential restructuring within the federal administration, which could influence his approach to corporate governance moving forward.
