A Delaware court has denied Elon Musk's $56 billion compensation package, previously approved by Tesla investors, on December 2, 2024.
Judge Kathaleen St. J. McCormick ruled that Tesla cannot pay Musk the amount, citing his close relationships with board members. She stated that while there were reasonable compensation amounts, the board capitulated to Musk's terms without proving their fairness.
This marks the second rejection of Musk's compensation package. Investors first voted in favor of it in 2018, but a shareholder lawsuit claimed the agreement was unreasonable. In January, Judge McCormick annulled the package, and a second vote in June 2024 also approved it.
In response, Tesla stated, "The court's decision is erroneous, and we intend to appeal. This ruling implies that judges and plaintiff lawyers are running companies from Delaware, not their rightful owners—shareholders." Musk added that shareholders should control company votes, not judges.
Moving forward, Musk and the management have two options: appeal the ruling, which typically takes about 12 months, or create a new compensation plan.