Elon Musk $56 Billion Pay Deal Rejected, Again

Tesla has vowed to appeal, after a judge in Delaware this week upheld her previous ruling that Tesla’s board members were too heavily influenced by Elon Musk when approving his record-breaking pay package.

The Guardian reported that Judge Kathaleen McCormick on Monday once again ruled that Elon Musk is still not entitled to receive the $56bn (£44bn) compensation package that stems back to 2018.

This is despite 75 percent of Tesla shareholders in the summer voting to reinstate the pay deal in June 2024.

Musk’s pay controversy

The issue began in January 2024, when Delaware Chancery Court Chancellor Kathaleen McCormick had struck down the 2018 pay deal, citing Musk’s “extensive ties” with board members, as well as concerns that the firm had misled shareholders about key details.

Multiple institutional Tesla shareholders had objected to Musk’s huge financial compensation package – at a time when the EV maker had opted to axe thousands of staff, and continues to face falling sales and eroding profit margins, as slowing demand for EVs around the world.

However Tesla shareholders voted in early June to reinstate Musk’s $56bn pay package, and also approved the firm’s incorporation move, away from Delaware to Texas.

The pay agreement will also give Elon Musk 25 percent voting control of Tesla.

Delaware rejection

But on Monday this week, the Guardian noted that Kathaleen McCormick of the court of chancery, upheld her January decision, and that Musk’s $56bn pay award will not be reinstated.

She said Tesla had failed to prove the fairness of the pay package.

Judge McCormick argued that Tesla board members were too heavily influenced by Musk and include many of Musk’s close allies, including as his former divorce attorney.

Shareholders, not judges

Musk reacted to latest ruling with a tweet on X (formerly Twitter), commenting that shareholders and not judges should control company votes.

Tesla vowed to appeal against the ruling, tweeting on X that the decision was “wrong”.

“This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners – the shareholders,” Tesla tweeted.

“This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners – the shareholders,” the electric car company said in a post on X.

Musk is the world’s richest person, with a current net worth is estimated at around $350bn, according to the Bloomberg Billionaires Index.

What next?

So what next for Tesla and Elon Musk?

Well, Tesla will likely appeal the ruling, as it tweeted it would.

However it is also likely that the EV firm will attempt to reconstitute a similar pay package in Texas, where the company moved its legal base earlier this year after the Delaware pay ruling.