By Sean McLain
A Delaware judge upheld her earlier ruling striking down Elon Musk's multibillion-dollar pay package, plunging Tesla's board into more uncertainty over how to compensate its superstar chief executive for a decade of work.
The court's decision follows a shareholder vote earlier this year approving the pay package for a second time. Tesla had argued that the vote addressed many of the court's criticisms that Musk's compensation deal had been flawed, partly because of insufficient disclosures to shareholders.
The judge, Chancellor Kathaleen McCormick, had in January ordered the entire package be rescinded, saying directors were beholden to Musk and the approval process for the pay deal was tainted and lacked transparency.
The ruling marks another setback for Tesla's directors, who have said the record stock-option deal was necessary to ensure Musk stayed focused on the carmaker at a time when it is facing slower growth in its automotive business.
Musk oversees five other companies besides Tesla, including artificial-intelligence venture xAI which has raised billions of dollars from private investors. In recent weeks, Musk's attention has been further divided after agreeing to help President-elect Donald Trump audit government regulations and expenditures through a proposed Department of Government Efficiency.
The board has said any new pay package for Musk will be more expensive for shareholders because the stock options will be awarded at a much higher price.
McCormick said lawyers for Tesla and Musk "got creative" with their arguments to overturn her prior ruling but ultimately their position wasn't backed up by legal precedent.
The judge also ruled on the award for the Tesla shareholder who brought the original suit, calling their request for $5.6 billion in legal fees "a bold ask" in a case about excessively high executive compensation. McCormick said the plaintiff was entitled to $345 million in either cash or Tesla shares.
Tesla and Musk can appeal the ruling.
Write to Sean McLain at sean.mclain@wsj.com
(END) Dow Jones Newswires
December 02, 2024 17:16 ET (22:16 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Comments