Judge Again Rejects Musk’s $56 Billion Pay Package from Tesla

We’re going to talk about Elon Musk, but first we’ve got to focus.

Forget, for a moment, about other recent stories involving the world’s richest man. Forget about his stated initiative to feed “all court cases” to an artificially intelligent computer and have it “render extremely compelling legal verdicts.” Forget about his legal feud with Open AI, in which he is attempting to block it from becoming a for-profit entity. We’ll leave it to others to opine on those and the many other Musk-related controversies while we stay in our wheelhouse of corporate governance and compliance.

We want to focus now on Elon Musk’s efforts to get a $56 billion payout from Tesla. In the latest legal twist on Musk’s compensation from the EV manufacturer he founded, a Delaware judge on December 2 reaffirmed a ruling she issued in January, 2024 that Tesla must revoke Musk’s record-breaking pay package.

Chancellor Kathaleen St. Jude McCormick denied a petition filed in August by attorneys for Musk and Tesla’s corporate directors to vacate the ruling issued earlier this year instructing the company to rescind Musk’s pay package. The judge called the compensation award “an unfathomable sum,” deeming it unfair to shareholders because it was negotiated by a board of directors controlled by Musk.

Musk and Tesla’s board originally hammered out the compensation plan now at issue in 2018. The lawyers who sued to nix the payout argued that shareholders lacked proper information when they first voted to ratify the agreement. McCormick agreed in her ruling from January.

In their petition to reinstate Musk’s pay, Tesla’s board members noted that the company’s shareholders approved the compensation package with full disclosures when they voted on it again in June. Therefore, the directors said, that should address McCormick’s objections outlined in the January ruling.

McCormick wasn’t buying it. In the ruling issued this month, she maintained the August petition from Musk and Tesla contained “fatal flaws” and accused his lawyers of trying to create new facts after the trial. “Were the court to condone the practice of allowing defeated parties to create new facts for the purpose of revising judgments, lawsuits would become interminable,” McCormick wrote in the opinion.

Of course, that won’t be the end of the legal battle over Musk’s compensation package. The stakes are even higher now than they were when the lawsuit was filed: The price of Tesla’s stock has climbed more than 40% since Republican Donald Trump won back the White House last month, meaning the original deal is now worth more than $100 billion.

Given the value of the potential payout and the size of his own war chest, Musk likely has plenty of time to continue the fight. Next stop, the Delaware Supreme Court.