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Tesla's $56 billion pay plan for Elon Musk rejected by judge

Reacting to the ruling, Musk posted on X (formerly Twitter), saying, “Shareholders should control company votes, not judges.”

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Elon Musk’s record $56 billion Tesla pay package has been struck down in court.

A Delaware judge ruled against reinstating the payment, saying it was unfair. Despite being approved by Tesla shareholders in 2018, the judge argued the decision was too heavily influenced by Musk.

Judge Kathaleen McCormick reaffirmed her earlier January ruling. She said Tesla’s board members weren’t independent enough to make a fair decision about Musk’s pay. According to the judge, the pay plan, which would have been the largest ever for a CEO of a public company, wasn’t justified.

Tesla argued that shareholders had voted for the package, with 75% approving it in 2018. But the judge disagreed. She said a stockholder vote couldn’t make the pay package fair in this case.

Reacting to the ruling, Musk posted on X (formerly Twitter), saying, “Shareholders should control company votes, not judges.” Tesla also expressed frustration. The company called the ruling "wrong" and announced plans to appeal.

In a statement on X, Tesla said, “This ruling means judges and lawyers control companies instead of shareholders.”

The pay package was designed to reward Musk for meeting ambitious Tesla growth goals. If successful, it would have given him $56 billion in Tesla stock. However, Judge McCormick ruled Tesla couldn’t prove the plan was reasonable.

Musk, who also leads SpaceX and X, is the world’s richest person. His net worth is estimated at $350 billion, according to Bloomberg’s Billionaires Index.

The news comes as Donald Trump, the U.S. president-elect, announced Musk would lead a new government department. The Department of Government Efficiency (nicknamed DOGE) aims to reduce government waste and regulations.

Trump praised Musk, saying DOGE would help “dismantle bureaucracy and restructure federal agencies.”

The court also ruled in favor of the Tesla shareholder who brought the case. The shareholder will receive $345 million in legal fees. However, they didn’t get the $5.6 billion in Tesla shares they had sought.

Experts say the ruling protects all shareholders, not just big investors. Charles Elson, a corporate governance expert, supported the judge’s decision. He said the case showed Tesla’s board wasn’t independent, and the pay plan went beyond reasonable limits.

“This ruling shows the importance of fair decision-making in companies,” Elson said.

The company moved its legal base there earlier this year after the Delaware court challenge. For now, the battle over Musk’s pay continues, and Tesla plans to fight on.

 

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