Tesla chief executive officer Elon Musk. — Reuters
NEW YORK: A Delaware judge has ruled that Tesla chief executive officer Elon Musk still is not entitled to receive a US$56bil compensation package despite shareholders of the electric vehicle company voting in June to reinstate it.
The ruling by the judge, Chancellor Kathaleen McCormick of the Court of Chancery, follows her January decision that called the pay package excessive and rescinded it, surprising investors, and cast uncertainty over Musk’s future at the world’s most valuable carmaker.
Musk did not immediately respond to an emailed request for comment. Tesla in a statement on X said: “The ruling is wrong and we’re going to appeal,” and added that the judge had overruled a super-majority of shareholders.
Musk and Tesla can appeal to the Delaware Supreme Court as soon as McCormick enters a final order, which could come as soon as this week. The appeal could take a year to play out.
Tesla has said in court filings that the judge should recognise a subsequent June vote by its shareholders in favour of the pay package for Musk, the company’s driving force who is responsible for many of its advances, and reinstate his compensation.
McCormick said Tesla’s board was not entitled to hit “reset” to restore Musk’s pay package.
“Were the court to condone the practice of allowing defeated parties to create new facts for the purpose of revising judgments, lawsuits would become interminable,” she said in her 101-page opinion.
She said a ratification vote like the one used by Tesla had to be conducted before the trial and a company cannot ratify a transaction involving a conflicted controller. She had determined Musk controlled the pay negotiations.
She also said Tesla made multiple material misstatements in its proxy statement regarding the vote, and could not claim the vote was a “cure-all” to justify restoring Musk’s pay.
Tesla shares fell 1.4% in after hours trade, after the ruling.
Gary Black, managing partner of The Future Fund, which owns Tesla stock, said on X that he believed the Delaware Supreme Court was more pragmatic than McCormick.
“I doubt this ruling will be resolved anytime soon, and it will likely be overturned by a more moderate court along the way,” he wrote.
The pay package had awarded Musk stock options if the company hit performance and valuation goals.
While the award originally was valued at up to US$56bil, Tesla’s shares have surged 42% since Nov 5, when Republican candidate Donald Trump, supported by Musk, won the US presidential election. Following that rally, the pay package is worth about US$101bil.
The ruling comes as Musk has been tasked by Trump with creating a more efficient government by slashing spending.
The role as co-lead of the new Department of Government Efficiency would be informal rather than a government position, allowing Musk to keep his job at Tesla as well as leading other companies including rocket maker SpaceX. — Reuters
