On Monday, a Delaware court affirmed her earlier decision that the compensation plan was illegally awarded, defeating Tesla CEO Elon Musk’s attempt to get his 2018 CEO pay package reinstated.
At over $56 billion, the package was the biggest CEO compensation plan for a publicly traded firm in American history. In a second post on his social media platform, Musk referred to the decision as “absolute corruption,” and Tesla stated in a post on X that it intends to challenge it.
By declaring that Musk had personally “controlled Tesla” and dictated the terms of his salary to a board that failed to engage in reasonable negotiations, Chancellor Kathaleen McCormick invalidated the pay plan in January. She referred to the procedure that resulted in that compensation plan’s approval as “deeply flawed.”
After the ruling, Tesla asked investors to “ratify” Musk’s 2018 CEO compensation plan in a June 2024 shareholder vote held during the company’s annual meeting in Austin, Texas. After the trial, Musk’s lawyers tried to use the outcome of that vote to persuade the judge to change her mind.
“Even if a stockholder vote could have a ratifying effect, it could not do so here,” McCormick said in her conclusion on Monday. “Lawsuits would become interminable if the court encouraged the practice of allowing defeated parties to create new facts for the purpose of revising judgments,” she continued.
The $345 million attorney fee judgment for the attorneys who successfully sued on behalf of Tesla shareholders to nullify Musk’s compensation plan was granted by McCormick as part of Monday’s ruling.
In a statement, lawyers from the plaintiff’s firm, Bernstein, Litowitz, Berger & Grossmann, said, “We are pleased with Chancellor McCormick’s ruling, which declined Tesla’s invitation to inject continued uncertainty into Court proceedings and thank the Chancellor and her staff for their extraordinary hard work in overseeing this complex case.”
Musk had blasted the Delaware court after the January ruling, writing on X, “Never incorporate your company in the state of Delaware.” Following a shareholder vote, Tesla formally changed its state of incorporation to Texas and reincorporated there.
Additionally, Musk changed SpaceX, his defense contractor business, from Delaware to Texas as its state of incorporation.
In recent weeks, Musk’s net worth has increased significantly despite the legal setback. Musk is more than $43 billion richer now than he was when Donald Trump won the election last month, excluding all of the options included in the compensation deal.
In the four weeks since the election, Tesla’s stock has surged 42% on hopes that Musk’s friendship with the future president will result in legislation that benefit his businesses.
As of Monday’s closing price, Musk’s remaining Tesla shares is valued at about $150 billion. He would rank among the richest individuals in the world based only on that, excluding his ownership of SpaceX. According to Equilar, Musk’s 2018 package would have been worth $101.4 billion at the current stock price.
