Elon Musk’s Tesla compensation package of $55.8 billion has just been released again. A US judge rejected the billionaire’s request to return his forfeited salary on Monday, rejecting his attempt to overturn an earlier ruling by a vote of Tesla shareholders.
Monday’s finding comes after a Delaware court initially threw out Musk’s Tesla multibillion-dollar compensation package in January. In that decision, Chancellor Kathaleen McCormick found that Tesla’s board of directors breached its duty to shareholders by casually following Musk’s proposal regarding his salary as CEO, not pushing back or attempting any negotiations. The court also ruled that the $55.8 billion package was inconsistent with Tesla’s profits, and the agreement made no requirements regarding the time Musk would spend working at the company.
Tesla shareholders vote to give Elon Musk a $56 billion severance package after being struck down by a court
Musk was very unhappy with this decision. In June, a similar compensation package of $55.8 billion was submitted to shareholders for further approval during Tesla’s annual meeting. Monday’s ruling noted that Tesla told shareholders the company could save $25 billion in accounting costs by accepting the deal.
When shareholders voted to reauthorize Musk’s payout, he and Tesla took the result back to court to ask that the earlier decision be overturned. In their request, they said that the company’s shareholders should be able to change the court’s decision even when there is a violation of their duty, saying that “the shareholders have the power to accept any actions of the company that they consider to be beneficial to them.”
Unfortunately for Musk, McCormick would have none of it. In his decision this week, the judge was not affected by the way Tesla created new evidence in an attempt to change the court’s decision, noting that they did not mention a single case where these allegations were allowed.
“If the court allowed the practice of allowing losing parties to introduce new facts for the purpose of reviewing judgments, the cases would be over,” McCormick wrote.
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The court pointed out the difference between newly discovered evidence, which was already available during the previous trial, and newly created evidence such as Tesla’s June vote. While newly discovered evidence may be grounds for a case to be reopened, newly created evidence is not.
McCormick also noted that Tesla made several false or misleading statements to its shareholders before the June ratification vote, such that any violations the court found could be remedied by reauthorizing Musk’s compensation.
“[E]even if a Stockholder Vote could have affirmative effect on the Grant, it could not here because of multiple, material errors in the Proxy Statement regarding the effect of the vote,” McCormick wrote.
Basically, shareholders can’t just get together and decide that what their board did was legal after a US court has already decided it wasn’t.
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Musk quickly took to social media to criticize the decision, saying “Shareholders should control the company’s votes, not judges.” Tesla also announced his intention to appeal.
“A Delaware judge has just overruled a large number of Tesla shareholders who voted twice to pay @elonmusk what he deserves,” wrote the official Tesla X account. “The court’s decision is wrong, and we will appeal. , we mean that judges and plaintiffs’ attorneys are managing Delaware corporations instead of their legal owners – the shareholders.”
Addressing these allegations in Monday’s ruling, the court found that company board members are more like trustees than agents. While agents represent another party (in this case Tesla’s shareholders), trustees have a legal obligation to act in the best interest of said party.