A judge in the United States has upheld a decision to deny Tesla CEO Elon Musk a multibillion-dollar pay package despite shareholders voting to restore the compensation deal.
The decision by a Delaware judge on Monday reaffirmed an earlier ruling to void the pay deal on the basis that Tesla’s board was too close to Musk and had not sufficiently protected shareholders’ interests.
Chancellor Kathaleen St Jude McCormick of Delaware’s Court of Chancery found that there was no legal precedent to reverse her earlier ruling and that if courts condoned “the practice of allowing defeated parties to create new facts for the purpose of revising judgments, lawsuits would become interminable”.
“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 in a 103-page opinion.
McCormick also found that Tesla had made “material misstatements” to shareholders about the effect of their vote to reinstate Musk’s pay deal.
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Tesla shares dropped 1.4 percent in after-hours trading following the ruling.
McCormick also rejected a request for $5bn in lawyer fees sought by the lawyers of plaintiff Richard Tornetta, a Tesla shareholder, instead granting the amount of $345m.
After McCormick’s decision to block the deal earlier this year, Tesla shareholders in June overwhelmingly voted to reinstate the package.
Tesla on Monday said the court’s decision was “wrong” and that it would appeal the decision.
“This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners – the shareholders,”’ the electric car company said on X.
Musk on X expressed agreement with a post describing the ruling as “corrupt”, and described McCormick as an “activist posing as a judge”.
Under the terms of his 2018 pay deal, Musk agreed to be paid in Tesla stock each time the company reached certain goals instead of receiving a salary.
Musk’s compensation was worth $56bn at the peak of Tesla’s valuation in late 2021 but has fluctuated over the years based on the company’s stock price.
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