Musk’s $56 billion compensation package is denied reinstatement by the judge

Elon Musk’s $56 billion compensation package has been banned by a Delaware judge who determined that Musk had too much influence over it.

A judge has decided not to reinstate Tesla CEO Elon Musk’s record-breaking $56 billion (£47 billion) compensation award.

Despite being authorized by directors and shareholders in the summer, the Delaware court’s ruling follows months of legal struggle.

Judge Kathaleen McCormick maintained her earlier ruling from January, in which she claimed that Mr. Musk had too much influence over the board members.

Mr. Musk responded to the decision by writing on X, “Shareholders, not judges, should control company votes.”

Tesla declared that the verdict was “wrong” and promised to appeal it.

In a post on X, the business stated, “This decision, if not overturned, means that judges and plaintiffs’ attorneys run Delaware companies instead of their rightful owners, the shareholders.”

The compensation package would have been the biggest ever for the CEO of a publicly traded business, according to Judge McCormick.

According to her, Tesla was unable to demonstrate that the compensation plan, which began in 2018, was equitable.

Although 75% of shareholders approved the payout in June, the judge disagreed that the amount should be so high, citing the “creative” arguments made by Tesla’s attorneys.

She added, “Even if a vote by stockholders could have a ratifying effect, it could not do so here.”

The judge also decided that the Tesla shareholder who filed the lawsuit against Tesla and Musk should not get the $5.6 billion in Tesla shares they requested, but rather $345 million in fees.

According to some analysts, Delaware’s conflict of interest statutes would have suffered a setback if the decision had gone in favor of Mr. Musk and Tesla.

According to Charles Elson of the University of Delaware’s Weinberg Centre for Corporate Governance, “the idea of conflict rules is to protect all investors,” not only minority investors.

Judge McCormick’s judgment was well-reasoned, according to Mr. Elson.

“You had a package that was way out of any sort of reasonable bounds, a board that wasn’t independent, and a process that was dominated by the chief executive,” he added. “It’s a pretty combination.”

According to Mr. Elson, he anticipates that Tesla will attempt to restructure a comparable compensation package in Texas, where the business relocated its headquarters earlier this year following the pay decision.