A judge in Delaware struck down a record-breaking pay package for billionaire Elon Musk for a second time—despite the $50 billion in stock options being approved by Tesla shareholders in June—upholding her previous judgment that the company’s shareholders were too under the influence of Musk to approve the package.
Elon Musk listens as President-elect Donald Trump speaks during a meeting with the House GOP ... [+]
Monday’s ruling by Chancellor Kathaleen McCormick of the Court of Chancery upheld that Musk had too much sway over the Tesla board when it approved his 2018 pay package, and ordered the company to pay the plaintiff attorney fees of $345 million.
McCormick ruled in January Musk’s payment package was to be voided because of Musk’s “enormous influence” over the company and the company’s inability to prove the compensation was “entirely fair.”
She said Tesla had to discuss a “form of final order” that implemented her decision and submit a joint letter that identified all issues that “need to be addressed to bring this matter to a conclusion at the trial level.”
After the January ruling, however, Tesla shareholders met in June and voted to approve the roughly $50 billion pay package—but McCormick said in Monday’s filing the request for the court to “flip its decision” after the shareholders voted in favor of the package went “against multiple strains of settled law.”
Tesla shares closed Monday at $357.10 and dropped about 1.5% in after-hours trading as of 5:30 p.m. EST.
Forbes has reached out to Tesla for comment.
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Musk’s response to the ruling. As of Monday at 6 p.m. EST, he had not publicly responded to the ruling. After McCormick first ruled his pay package was void, Musk tweeted “Never incorporate your company in the state of Delaware.”
Tesla shareholder Richard Tornetta brought the suit against Tesla and argued the payment plan was excessive and the board breached its fiduciary duties by awarding Musk a performance-based plan that was “the largest potential compensation opportunity ever observed in public markets.” McCormick scrutinized the relationship between the board and Musk and said the company did not protect shareholder interests. In her Monday filing, McCormick said the Tesla board’s June vote to greenlight the pay package could not have a ratifying effect. The package was initially worth $2.6 billion, though it rose to $56 billion by the time McCormick first ruled it void in January. At market close on Monday, the package was worth $101.5 billion, Bloomberg reported. Tesla’s market capitalization was $1.12 trillion as of Monday.
McCormick’s ruling that Musk’s pay package cannot stand comes as his net worth hit a record high post-election. On Nov. 22 Forbes reported Musk was the richest he had ever been when his net worth was $321.7 billion at market close, and it has continued to grow since then. His fortune at that point was about $70 billion past what it was on Election Day, after which Tesla shares surged 40%.
Forbes estimates Musk has a net worth of $336.8 billion, as of Monday evening, making him the wealthiest person in the world. In the valuation, Forbes has discounted the value of the stock options under dispute by 50%.