A Delaware judge has once again slapped down Elon Musk's pay package from Tesla.
"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," a Monday filing from Delaware Chancellor Kathaleen St. J. McCormick reads.
In her ruling, McCormick stuck to her earlier finding that Tesla's board was unduly influenced by Musk when it came to creating his compensation package — which at the time was the largest pay package ever to be awarded to a CEO with a value of $2.3 billion when it was granted in 2018.
McCormick ruled that Musk and Tesla's board members and executives had no procedural grounds to change the outcome of her original determination "based on evidence they created after trial," apparently referring to a second shareholder vote approving Musk's compensation package that was held in June.
She also found that the arguments used to challenge her initial ruling were invalid and weren't raised in a timely manner. The judge ordered Tesla to pay the plaintiff — the Tesla shareholder and former heavy metal drummer, Richard Tornetta — $345 million, which the company may choose to pay in freely tradeable stock.
Stock for the automaker dipped nearly 1.5% in after-hours trading following the news.
Representatives for Tesla did not immediately respond to a request for comment from Business Insider. In a post on X, the company said it will appeal the ruling.
A Delaware judge just overruled a supermajority of shareholders who own Tesla and who voted twice to pay @elonmusk what he’s worth.
— Tesla (@Tesla) December 2, 2024
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 investors voted to approve Musk's pay package for the second time in June. Tesla shareholders had originally voted in favor of the compensation plan in 2018, but McCormick ruled to void the agreement in January after a Tesla shareholder filed a lawsuit alleging the agreement was "beyond the bounds of reasonable judgment."
At the time, McCormick said Musk had too much power over the agreement due to his close relationships with board members and the ties led to an "unfair price." In her earlier ruling, she said Tesla had failed to make sure investors were fully informed regarding the proposal.
When the compensation package was voided, it was estimated to be worth more than $55 billion due to a surge in the value of Tesla stock. At Monday's closing price, Bloomberg reported that it was worth $101.5 billion.
Musk's net worth has also climbed as the legal saga over his Tesla compensation has played out. In late November, Business Insider reported that he'd broken his previous $340 billion wealth record after a Tesla stock surge following the presidential election. The Bloomberg Billionaires Index estimated his net worth at $353 billion as of December 2.
"Contrary to how some have read the Post-Trial Opinion, the court did not find that the Board should have paid Musk nothing," McCormick wrote in her Monday filing. "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."
In the months that followed the judge's original ruling, Tesla campaigned for Musk's pay and eventually came away with approval from over 70% of the voting shares. The company then presented the vote to McCormick, arguing that the shareholder ratification had addressed her concerns.
However, McCormick in her latest ruling, wrote: "Even if a stockholder vote could have a ratifying effect, it could not do so here."
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