The CEO of Tesla and the richest person in the world, Elon Musk, has suffered yet another setback as Delaware Judge Kathaleen McCormick denied his record-breaking $56 billion compensation plan. Following months of legal battle and examination of Tesla’s governance, the decision was upheld despite the consent of shareholders and directors.
In her ruling, Judge McCormick reiterated her January decision, highlighting the board’s undue influence by Musk. She deemed the 2018 pay package, which would have been the largest ever for a listed company CEO, as unfair and beyond reasonable bounds. Tesla, determined to contest the ruling, announced plans to appeal, describing the decision as “wrong” and claiming it undermines shareholder rights.
Reacting to the judgment, Musk expressed his discontent on X (formerly Twitter), stating, “Shareholders should control company votes, not judges.” Tesla echoed this sentiment, warning that the ruling risks shifting control of Delaware companies from shareholders to judges and plaintiffs’ lawyers.
The controversy surrounding the pay deal underscores broader concerns about governance. Charles Elson of the University of Delaware’s Weinberg Center for Corporate Governance praised the judge’s decision, citing a lack of board independence and an excessive compensation package. “It’s quite a combo,” Elson remarked, adding that the ruling reinforces Delaware’s conflict of interest laws designed to protect all investors.
The case has further spotlighted Musk’s influence, amplified by his leadership roles at SpaceX, X, and Tesla, as well as his appointment by President-elect Donald Trump to head the newly formed Department of Government Efficiency (Doge). Musk’s net worth, estimated at $350 billion, continues to fuel debates over corporate oversight and executive compensation.
Tesla, now legally based in Texas, may attempt to reconstitute a similar pay package under new jurisdiction, signaling that the battle over Musk’s compensation is far from over.
