Judge Upholds Decision To Invalidate Elon Musk’s Tesla $56B Compensation Package, Tesla Responds

A Delaware judge upheld an earlier decision Monday requiring Tesla to cancel Elon Musk’s multibillion-dollar compensation package.

Delaware Chancellor Kathaleen St. Jude McCormick dismissed a motion from Musk and Tesla’s board members to overturn her previous mandate that rescinded Musk’s lucrative deal. McCormick also denied a request for legal fees from the plaintiff’s attorneys as they sought Tesla stock valued at over $5 billion but will receive $345 million instead.

“The large and talented group of defense firms got creative with the ratification argument, but their unprecedented theories go against multiple strains of settled law,” McCormick wrote.

McCormick’s 103-page decision noted that a shareholder vote alone cannot legitimize a transaction marred by conflicts of interest. She further stated that even if such a vote could ratify the deal, it would still be invalid here due to numerous substantial inaccuracies in the proxy statement.

McCormick remarked that the $5.6 billion legal fee proposal by the shareholder’s lawyers, once as high as $7 billion, was ambitious. She emphasized that Delaware’s Supreme Court has highlighted the need to avoid overly generous legal fees, particularly in cases of excessive compensation.

The judge ultimately decided that a $345 million fee was just, nearly matching half of the record $688 million awarded in 2008 following the Enron scandal. This amount, she said, adequately compensates for a complete legal victory.

In response, Tesla took to social media to criticize McCormick’s decision that overruled a supermajority of shareholder votes favoring Musk’s compensation.

“The court’s decision is wrong, and we’re going to appeal,” Tesla wrote