U.S. Judge Rejects $56 Billion Tesla Payment Package Again
A U.S. judge, Kathaleen McCormick, ruled that Tesla CEO Elon Musk is not entitled to a $56 billion compensation package, despite Tesla shareholders voting to "reinstate" it six months ago. The decision by Delaware Judge Kathaleen McCormick follows her January ruling, which surprised investors by canceling the payment package, deeming it excessive.
The ruling casts uncertainty over Musk's future at the world's most valuable automaker. Tesla's board argued that a substantial payment plan was necessary to retain Musk, who is already the world's richest person, echoing this argument himself.
McCormick also decided that Tesla should pay the plaintiffs' attorneys $345 million, significantly lower than the billions initially requested. Tesla stated in court filings that it should approve the payment package made by shareholders in June for Musk, who is seen as the driving force behind much of the company's progress, and that he should return his compensation. The company and shareholders maintained that Musk met the initially established milestones when the payment package was prepared.
Tesla initially designed Musk's payment package in 2017, setting conditions for him to receive 12 different stock option tranches based on the company's achievement of specific revenue and market targets. Shareholders approved this package by a wide margin in 2018, but a single investor filed a lawsuit claiming that the board was misleading and the package was unfair.
Some major shareholders, including Norway's sovereign wealth fund and the California state teachers' retirement system, voted against the payment package but were unsuccessful. When the salary package was approved in June, Musk responded during a Tesla event on stage, saying, "I just want to start by saying, damn, I love you guys!"
Musk did not immediately respond to McCormick's latest ruling; however, he has previously criticized her harshly and called on other business owners to avoid Delaware, where most U.S. companies file due to its friendly tax policies. Despite the ongoing lawsuit regarding the salary package before the Delaware judge, Musk moved Tesla's physical headquarters from California to Texas.
McCormick had previously determined that Tesla's board conducted an "extremely flawed" process to determine Musk’s payment. She ruled that the board was filled with personal conflicts and was packed with close associates of Musk, such as former divorce attorneys.