Tesla CEO Elon Musk's colossal salary package has been rejected once again by a Delaware judge, despite shareholder approval in a June vote. That vote validated stock options worth around $100 billion based on the closing price of Tesla shares on December 2nd.
Judge McCormick's denial of the motion
In her December 2 decision, Judge Kathaleen McCormick of the Delaware Court of Chancery denied Tesla's motion for reconsideration. She specified that the shareholder vote in favour of the salary package, which had taken place this summer, did not alter her original decision.
The judge had already ruled, in January, that the package offered to Musk was excessive and inappropriate, in particular due to the lack of independence of Tesla's Board of Directors in relation to its executive.
Musk's reaction
Elon Musk was quick to react to the new court ruling. On his own social network X (formerly Twitter), he expressed his displeasure: “Absolute corruption”.
An astronomical sum
Initially, Musk's 2018 salary settlement was valued at $2.6 billion. However, Judge McCormick annulled this offer in January on the grounds that it was excessive. Since then, the value of Tesla shares has risen sharply, and the package has reached an astronomical sum, peaking at $56 billion.
Tesla did not comment on the court ruling other than to express its displeasure on X, where it said, “A Delaware judge has overturned a supermajority of Tesla shareholders who voted twice to pay Elon Musk what he was worth.”
Tesla lawyers' arguments
Elon Musk's lawyers asked the court to review its decision, arguing that the will of the shareholders should take precedence over that of the judge. In their argument, they pointed out that 77 percent of shareholders had supported the proposal, and felt that this decision should be taken into account by the court.
However, Judge McCormick maintained her position, finding that allowing a losing party to create new facts to revise a judgment would be dangerous and lead to endless litigation.
In addition, the judge ordered Tesla to pay the plaintiffs' legal fees in the case to the tune of $345 million, even though the plaintiffs had initially claimed $6 billion.
A complex situation for Tesla and its shareholders
This decision comes after Musk's personal fortune reached a record level, exceeding the $340.4 billion he had accumulated by November 2021. Tesla’s soaring share price, combined with the impact of the CEO's relationship with the President-elect, to whom he is an advisor, has contributed to this growth in his wealth.
This rejection by the court could have important implications for Tesla's governance and the way the company will be run in the future.
Towards an appeal?
Tesla has announced its intention to appeal the decision, saying that the court's ruling could weaken the authority of shareholders in Delaware companies, in favour of judges and plaintiffs' lawyers.
