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Elon Musk’s $56 billion pay package was rejected by a Delaware judge on Monday after a motion to revise was denied. The ruling follows a legal challenge against the 2018 compensation plan, which Tesla (TSLA+3.06%) shareholders initially contested, claiming it was improperly granted.
The compensation plan, one of the largest of its kind, was based on performance targets rather than guaranteed pay. Despite a majority of Tesla investors voting to approve the package at the company’s June shareholder meeting, Judge Kathaleen McCormick ruled that a shareholder vote couldn’t stand. She described the package as “deeply flawed” in January, emphasizing that it was improperly structured and failed to meet legal standards for executive compensation. Tesla’s legal team had hoped to sway the court by pointing to the vote, but McCormick rejected that argument.
In addition to rejecting the revisions, Monday’s decision granted $345 million in attorney fees to the lawyers who successfully challenged Musk’s pay plan on behalf of Tesla shareholders. The court deemed this amount an “appropriate sum to reward a total victory.”
Tesla has the option to pay this fee in either cash or by issuing stock that can be sold on the open market.
While Musk could appeal the decision to the Delaware Supreme Court, this ruling could have broader implications for how companies structure executive compensation and the role of shareholder votes in such decisions.
Still, Musk’s wealth continues to climb. His net worth has surged by $43 billion in recent weeks, largely thanks to a 42% rise in Tesla stock.