Musk's $56bn Pay Deal Rejected for the Second Time

A judge has ruled that Tesla CEO Elon Musk's record-breaking $56bn pay package will not be reinstated.

The decision, made in a Delaware court, follows months of legal disputes and despite being approved by shareholders and directors in the summer.

Judge Kathaleen McCormick reaffirmed her previous ruling from January, stating that board members had been unduly influenced by Musk.

Reacting to the ruling, Musk wrote on X: "[S]hareholders should control company votes, not judges."

Tesla has pledged to appeal the ruling, calling the decision "incorrect."

"This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners – the shareholders," the company said in a post on X.

Judge McCormick stated that the pay package would have been the largest ever granted to the CEO of a publicly listed company.

She also noted that Tesla failed to demonstrate that the pay package, dating back to 2018, was fair.

A shareholder vote on the payment passed with 75% approval in June, but the judge disagreed that the pay should be so substantial, despite what she described as "creative" arguments from Tesla's lawyers.

“Even if a stockholder vote could have a ratifying effect, it could not do so here," she wrote in her opinion.

The judge also determined that the Tesla shareholder who brought the case against Tesla and Musk should be awarded $345m in fees, but not the $5.6bn in Tesla shares they had requested.

Some observers suggested that a ruling in favor of Musk and Tesla would have undermined conflict of interest laws in Delaware.

Charles Elson of the University of Delaware's Weinberg Center for Corporate Governance stated, "The purpose of conflict rules is to protect all investors, not just minority ones."

He added that Judge McCormick's decision was well-reasoned.

"You had a board that wasn't independent, a process that was dominated by the CEO, and a package that was way out of any sort of reasonable bounds," he said. "It's quite a combo."