Elon Musk loses bid to reinstate $56 billion pay package

Points to remember:

• Elon Musk failed to reinstate his $56 billion compensation package for 2018.
• In litigation brought by shareholders, a Delaware court upheld its January ruling that the compensation approval process was “seriously flawed.”
• Tesla used the vote result from its June annual meeting to ask shareholders to “ratify” the 2018 compensation plan, which it used to overturn the judge’s earlier ruling.
• “Lawsuits would become endless if the court permitted the practice of allowing defeated parties to fabricate new facts in order to change judgments,” Chancellor Kathaleen McCormick said in her conclusion.

All restored offsets fail

The plan, worth approximately $56 billion, is the largest compensation plan in U.S. history for a public company executive. Tesla said in a post on social media platform X, which Musk owns, that it planned to appeal the decision. Musk, in another post on X, called the decision “absolute corruption.”

In January, Chancellor Kathaleen McCormick canceled the compensation plan, ruling that Musk had individually “controlled Tesla” and dictated the terms of his compensation to a board that had not negotiated fairly. She called the process leading to the approval of this compensation plan “deeply flawed.”

Following the notice, Tesla held a shareholder vote in June at its annual meeting in Austin, Texas, asking investors to “ratify” Elon Musk’s CEO compensation plan for 2018. Musk’s lawyers tried to convince the judge to reconsider her opinion after the trial, based on the results of this vote.

“Even if a shareholder vote could have a ratifying effect, it could not do so here,” McCormick wrote in his opinion Monday. “If the court tolerated the practice of allowing defeated parties to create new facts in an effort to revise judgments, lawsuits would become interminable. »

$345 million in fees for lawyers

As part of Monday’s opinion, McCormick approved a $345 million attorney’s fee award for attorneys who successfully sued on behalf of Tesla shareholders to overturn Musk’s compensation plan .

“We are pleased with Chancellor McCormick’s decision to decline Tesla’s invitation to inject continued uncertainty into the legal proceedings and thank the Chancellor and her staff for their extraordinarily hard work in overseeing this complex matter.” attorneys from Bernstein, Litowitz, Berger & Grossmann, the firm representing the plaintiff, said in a statement.

Following the January ruling, Musk lashed out at the Delaware court, posting on X: “Never incorporate your business in the State of Delaware.” Tesla then held a shareholder vote to reincorporate in Texas and officially changed its state of incorporation there.

Musk also moved the state of incorporation of his defense company SpaceX to Texas from Delaware.

Despite the legal setback, Musk has seen his net worth increase significantly in recent weeks. Excluding all options included in the salary package, Musk is more than $43 billion richer since Donald Trump’s election victory in November. Tesla shares have soared 42% in the four weeks since the election, driven by optimism that Musk’s intimacy with the new president will lead to policies favorable to his companies.

The Tesla shares that Musk still owns are worth nearly $150 billion based on Monday’s closing price. This alone, not counting its stake in SpaceX, would place it among the world leaders the richest people. Equilar estimates that at the current stock price, Musk’s 2018 financing plan would have reached $101.4 billion.