Elon Musk is no stranger to controversy or the courtroom, but Monday’s ruling from Delaware Chancellor Kathaleen McCormick might sting a little extra.
The judge doubled down on her decision to toss out Musk’s multibillion-dollar Tesla compensation package, calling it a deal marred by conflicts of interest and sham negotiations. Ouch.
For those keeping score, this saga started back in 2018, when Musk’s compensation deal was valued at a jaw-dropping $56 billion. Yes, billion with a “B.” The plaintiff, a Tesla shareholder, cried foul, alleging that the deal was a product of rubber-stamp board members and a lack of independent oversight.
Fast-forward to now, and McCormick has made it crystal clear: shareholder votes don’t legitimize deals riddled with conflicts and “substantial inaccuracies” in proxy statements. Translation? Even if the shareholders were on board, the process was flawed from the start.
JUST IN: Delaware activist judge Kathaleen McCormick declines to reinstate Elon Musk’s Tesla compensation package, once again overruling the company’s board and more than 72% of its shareholders.
Instead, she ordered Tesla shareholders to pay $345 million in legal fees to… pic.twitter.com/a8dsypXpJa
— KanekoaTheGreat (@KanekoaTheGreat) December 2, 2024
Tesla wasn’t about to take the ruling lying down. In a statement on social media, the company slammed the court’s decision, claiming it effectively undermines shareholder authority and puts lawyers and judges in charge of Delaware’s corporate governance. Strong words, but let’s not ignore the irony here. Tesla’s appeal to shareholder rights might sound noble, but it conveniently sidesteps the fact that the entire process behind Musk’s mega-payout is what’s under scrutiny.
“The court’s decision is wrong, and we’re going to appeal,” Tesla said on X. “This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners – the shareholders.”
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
And let’s talk about those legal fees. The plaintiff’s lawyers initially went for the jugular, asking for a whopping $5.6 billion in fees. That’s the kind of number that makes even Wall Street blush. McCormick wasn’t having it, instead settling on $345 million—still eye-popping but far from their ambitious ask. Tesla, meanwhile, is painting this as yet another overreach by a legal system they argue is out to hamstring innovation and success.
The cherry on top of all this? Musk’s ongoing drama with Twitter, now rebranded as X. This same judge presided over the mess surrounding Musk’s $44 billion purchase of the platform, where she expedited proceedings after Musk tried to back out. If anyone thought Musk would shy away from a legal fight after that debacle, this Tesla compensation saga proves otherwise.
At its core, this case isn’t just about Musk’s paycheck—it’s about the balance of power in corporate America. Are boards and shareholders truly in control, or is it the lawyers and judges calling the shots? Tesla’s fight isn’t over yet, but one thing is clear: when you’re Elon Musk, the stakes—and the headlines—are always high.
