A Delaware judge ruled Monday that Tesla CEO Elon Musk is still not entitled to a $56 billion compensation package, despite the electric vehicle company’s shareholders voting to reinstate him.
The decision by the judge, Chancellor Kathaleen McCormick of the Court of Chancery, follows her January ruling that called the pay package excessive and struck it down, surprising investors and casting uncertainty over Musk’s future at the most valuable carmaker in the world.
Musk did not immediately respond to an emailed request for comment.
Tesla has said in court filings that the judge should recognize a later June vote by its shareholders in favor of a pay package for Musk, the company’s driving force behind many of its advances, and restore his compensation. .
McCormick also ordered Tesla to pay the lawyers who brought the case $345 million, far less than the $6 billion they originally sought.
Shareholders also flooded the court with thousands of letters arguing that the January ruling raised the possibility that Musk would leave Tesla or develop some products such as artificial intelligence in ventures other than Tesla.
Lawyers for shareholder Richard Tornetta, who sued in 2018 to challenge Musk’s compensation package, had argued that Delaware law doesn’t allow a company to use a ratification vote to essentially overturn a lawsuit’s decision.
McCormick in January disclosed that Musk improperly controlled the 2018 board process to negotiate the pay package. The board had said Musk deserved the package because he hit all the ambitious targets for market value, revenue and profitability.
But the judge criticized Tesla’s board as “subservient” to Musk, saying the compensation plan was proposed by a board whose members had conflicts of interest because of close personal and financial ties to him.
After the January ruling, Musk criticized the judge on his X social media platform and encouraged other companies to follow Tesla’s lead and reincorporate in Texas from Delaware, though it’s unclear if any companies have done so.
The judge in her January ruling called the pay package “the largest compensation plan ever — an outrageous amount.” It was 33 times larger than the next largest executive compensation package, which was Musk’s 2012 pay plan.
Musk’s 2018 pay package gave him stock grants worth about 1% of Tesla’s equity each time the company hit one of 12 tranches of operational and financial growth goals.
Musk has not received any guaranteed salary. Tornetta argued that shareholders were not told how easily the goals would be achieved when they voted on the package.
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