Judge Refuses to Reinstate Elon Musk’s $56B Pay Deal, Despite Tesla Shareholder Vote

• Delaware judge Kathaleen McCormick has again denied Elon Musk’s Tesla pay package.
• The judge first denied Musk’s pay package in January.
• Tesla has vowed to appeal the decision.

Tesla CEO Elon Musk has again had his $56 billion compensation package ruled against by a judge, despite company shareholders voting to reinstate it.

Kathaleen McCormick, a Delaware judge, first denied the pay package in January 2024 after claiming that Musk was in charge of the negotiation process.

Musk Denied

After McCormick denied the Tesla CEO’s pay package at the beginning of the year, the company quickly called a shareholder vote to rectify the payout.

However, on Monday, Dec. 2, McCormick again refused to approve the payment, calling it “fatally flawed” and “indefensible.”

In her ruling, McCormick said: “The large and talented group of defense firms got creative with the ratification argument, but their unprecedented theories go against multiple strains of settled law.”

“Novelty is not necessarily damning, but defendants’ novel request flies in the face of the policy bases for all relevant rules of procedure,” it added.

Tesla and Musk Fight Back

Following the decision, Tesla said it would appeal the verdict to a higher court, claiming the judge had overruled “a supermajority of shareholders who own Tesla” and voted to pay Musk “what he’s worth.”

The electric vehicle manufacturer claimed that if the ruling was not overturned, it would mean judges and lawyers would run Delaware companies “rather than their rightful owners—the shareholders.”

Musk echoed this statement on X , stating that “shareholders should control company votes, not judges.”

Wedbush analyst Dan Ives also criticized McCormick’s decision, telling Barrons : “This is a Twilight Zone situation that the Delaware judge rejected a pay package approved by shareholders now twice.”

However, Ives believes Tesla and Musk will win the battle following the appeal.

Musk vs. McCormick

The dispute over Musk’s Tesla pay began in June 2018 when a Tesla shareholder, Richard Tornetta, filed a lawsuit challenging the record-breaking pay agreement that granted Musk the option to earn over $50 billion if certain milestones were achieved.

The case came to a head in 2022 when it was brought before McCormick in Delaware, who took sides with Tornetta.

“Put simply, neither the compensation committee nor the board acted in the best interests of the company when negotiating Musk’s compensation plan. In fact, there is barely any evidence of negotiations at all,” she wrote.

McCormick is known for overseeing high-profile cases, including Musk’s acquisition of Twitter.

In Monday’s decision, the Delaware judge reaffirmed that Tesla was not able to make good on previous misconduct by convincing shareholders to vote.

McCormick said this would undermine the shareholders’ ability to challenge corporate wrongdoing.