A Delaware judge has dealt a significant blow to Elon Musk, ruling against his controversial multibillion-dollar compensation package at Tesla.
Chancellor Kathaleen St. Jude McCormick upheld her earlier decision requiring Tesla to cancel the pay deal, which was approved by shareholders but challenged in court by a Tesla investor.
McCormick dismissed a motion from Musk and Tesla’s board to overturn the ruling, stating that shareholder approval alone cannot legitimize a transaction influenced by conflicts of interest.
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In her 103-page decision, McCormick criticized the defense’s arguments, calling them “unprecedented theories” that contradict established legal principles. She also highlighted inaccuracies in the proxy statement presented to shareholders.
Tesla expressed strong disagreement with the ruling and announced its intention to appeal. “The court’s decision is wrong, and we’re going to appeal,” the company stated on social media. “This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners – the shareholders.”
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While the court denied the plaintiff’s attorneys’ request for over $5 billion in Tesla stock as legal fees, it awarded them $345 million, nearly half of the record $688 million awarded in the Enron case.
The lawsuit, filed by a Tesla shareholder, challenged Musk’s 2018 compensation package, which could have been worth up to $56 billion. McCormick previously ruled that Musk had orchestrated the deal through improper negotiations with non-independent directors.
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