A judge has rejected Elon Musk’s $56 billion compensation package for a second time. This is despite Tesla shareholders voting to reinstate it in June. Judge Kathaleen McCormick blocked the plan, saying Tesla’s board of directors was pressured to accept the massive payment because of Musk’s influence.
This package is now worth $101 billion, based on Tesla’s closing share price Monday. This is a record-breaking pay package for Musk as Tesla’s CEO. Musk is also known for being a Dogecoin (DOGE) advocate.
Through a December 3rd, X post (formerly Twitter), Tesla said the court went against what most shareholders wanted. Shareholders voted twice to give Musk the compensation. Tesla said the court’s decision was wrong and it plans to appeal. Tesla argued that if the ruling is not changed, it would show that judges and lawyers have all the power over Delaware-based companies, taking away power from the companies’ real owners.
A Delaware judge just overruled a supermajority of shareholders who own Tesla and who voted twice to pay @elonmusk what he’s worth.
The court’s decision is wrong, and we’re going to appeal.
This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware…
— Tesla (@Tesla) December 2, 2024
Court Says the Package Is Too Much
The judge had already taken away Musk’s Tesla pay package in January, saying it was an “unfathomable sum” that was unfair to shareholders. The pay package was excessive, which could affect Musk’s future at Tesla.
And in the latest court order, Judge McCormick said Musk’s power over the board was a big reason for the compensation deal, and so the terms were not “entirely fair.” She said the company did not fully inform investors before they approved the pay package. The board could have decided on a reasonable compensation amount but instead did what Musk wanted. McCormick said:
“There were undoubtedly a range of healthy amounts that the Board could have decided to pay Musk. Instead, the Board capitulated to Musk’s terms and then failed to prove that those terms were entirely fair.”
The lawsuit was filed by shareholder Richard Tornetta. Tesla must also pay $345 million in fees to Tornetta’s lawyers. This amount must be paid in cash or company shares.In response to Tesla’s legal loss and aligning with the overall trend, Dogecoin fell by 3.36% over the last 24 hours. However, the token has seen a notable hike of 180% over the last 30 days.
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