Delaware Judge Upholds Ruling Against Elon Musk’s Tesla Pay Package
A Delaware judge has reaffirmed her previous decision requiring Tesla to revoke CEO Elon Musk’s multibillion-dollar pay package. Chancellor Kathaleen St. Jude McCormick denied a request to vacate her earlier ruling, solidifying her stance on the controversial compensation plan.
The lawsuit, initiated by a Tesla stockholder, challenged Musk’s 2018 compensation package, initially valued at $56 billion but subject to fluctuations with Tesla’s stock price. McCormick concluded that the pay package was engineered through sham negotiations, casting doubt on its legitimacy.
In her ruling, McCormick rejected the defense’s argument that a recent shareholder vote ratifying the pay package should validate it. The judge emphasized that stockholder votes cannot ratify conflicted-controller transactions and cited material misstatements in the proxy statement as preventing proper ratification.
Musk, expressing his disagreement with the ruling on social media platform X, advocated for greater shareholder control over company votes.
In a separate decision, McCormick addressed the plaintiff attorneys’ fee request. While the lawyers sought over $5 billion in Tesla stock, citing significant benefits to shareholders, the judge found this request excessive. Instead, she awarded $345 million, deeming it appropriate for the total victory achieved.
The fee award, while substantial, pales in comparison to the initial request. McCormick’s decision aims to balance rewarding legal success with preventing excessive windfalls to counsel. The award’s magnitude has drawn comparisons to the 2008 Enron litigation legal fees, highlighting the significant financial implications of high-profile corporate cases.
As this legal battle continues to unfold, it raises important questions about executive compensation, corporate governance, and the role of shareholder approval in major business decisions.
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