WASHINGTON: A US judge on Monday upheld her decision to reject Elon Musk’s massive $55.8 billion compensation package at Tesla, denying an attempt to restore the pay deal through a shareholder vote.

In a court filing, Chancellor Kathaleen McCormick of Delaware’s Court of Chancery ruled that Tesla’s attempt to ratify Musk’s compensation package through a June shareholder vote could not override her January decision striking down the package as excessive and unfair to shareholders.

McCormick found multiple flaws in Tesla’s ratification attempt, including “material misstatements” in documents provided to shareholders about the effect of their vote. “The motion to revise is denied,” McCormick wrote.

“The large and talented group of defence firms got creative with the ratification argument, but their unprecedented theories go against multiple strains of settled law,” she added. In a statement on Musk’s X social media platform, Tesla said it would appeal the verdict.

“Shareholders should control company votes, not judges,” said Musk, in a separate post.

The court also awarded $345 million in attorney fees, significantly less than the $5.6 billion requested by the lawyers of plaintiff Richard Tornetta, a Tesla shareholder.

While acknowledging their calculation method was technically sound under Delaware law, which bases fees on the percentage of benefit achieved, McCormick ruled that such a large award would constitute an excessive windfall.

Shareholders originally backed the Musk compensation plan in March 2018 that was specifically designed to reward the 53-year-old founder for Tesla’s significant growth. But in a lawsuit, Tornetta accused the defendants of failing in their duties when they authorised the pay plan and alleged that Musk dictated his terms to directors, who were not sufficiently independent from their star CEO.

Published in Dawn, December 4th, 2024