A Delaware court has rejected Elon Musk’s compensation package for his role as CEO of Tesla despite it being approved by shareholders during a meeting in June. Currently with a value of approximately $101 Billion, the pay package of Musk is based on Monday’s closing stock of Tesla which included 303 million stock options.
It is the same judge, Chancellor Kathaleen McCormick of Delaware Chancery Court who has previously also dismissed the package in January when it was valued at $56 billion.
In her early ruling, McCormick sided with the primary shareholder who contested the package emphasizing that Musk and the Tesla board have the responsibility to demonstrate the fairness of the compensation plan which they failed to do.
Following the re-approval of the 2018 pay package by 84% of shares not owned by Musk or by his brother Kimbal Musk, Musk’s legal team in June sought to overturn January’s ruling of McCormick. However, on Monday she once again denied their motion. She stated that the majority approval by shareholders did not necessarily indicate that Musk’s compensation was in their best interests.
McCormick stating her opinion remarked that “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”.
Musk does not receive a cash salary or a bonus from Tesla, instead, he generates his income through substantial stock option packages that allow him to acquire millions of Tesla shares at a significantly reduced price.
McCormick agreed with the assertion that the board is overly aligned with the CEO of Tesla, highlighting that Musk himself has said that he only negotiates against himself regarding his compassion. In her opinion, while Musk is eligible for some form of remuneration, the final award was not equitable for the shareholders.
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