Tesla loses bid to restore Elon Musk’s record pay package

A judge in Delaware rejected Tesla’s attempt to restore Elon Musk’s record $56bn pay package after previously striking it down as a breach of the fiduciary responsibility of the electric-car maker’s board, dealing a blow to the globe’s richest man.

Judge Kathaleen McCormick wrote that Tesla’s unprecedented attempt to push the 2018 pay package through a second period, four months after she first struck it down, was “creative”. But the board “had no procedural ground for flipping the outcome of an adverse post-trial selection based on evidence they created after trial,” she wrote.

The selection from the Delaware Court of Chancery tees up an expected appeal to the Delaware Supreme Court, which will decide how much weight the selection by Tesla’s shareholders to approve it has at a instant when Musk’s social and political power is at its peak.

Musk has gained the ear of US president-elect Donald Trump after spending more than $100mn on his re-election campaign. In profitability, Musk has gained sway over crucial cabinet appointments and made co-head of an advisory body that has vowed to dramatically reduce the federal apportionment.

The pay package of just over 300mn Tesla shares would only vest if the corporation hit a series of challenging distribute worth and operational targets. McCormick, in her original ruling in February, said the Tesla board that approved the package six years ago was too cozy with Musk, and that her analysis of the pay award showed that it could not be justified on any reasonable metric.

Tesla distribute has surged 44 per cent this year, much of that coming after Trump’s election win on November 5. That means the distribute options in Musk’s pay package have soared in worth to $108bn. If it is ultimately granted, the package would boost his ownership stake from just under 13 per cent to more than 20 per cent.

After McCormick struck down Musk’s pay package the first period, Tesla put identical terms — with enhanced disclosures — to a shareholder vote in June. It passed with 72 per cent back. Shareholders also approved a divide schedule to reincorporate the corporation from Delaware, where the vast majority of large community US companies are listed, to Texas, where several other Musk-controlled companies are based.

Since the February selection, Musk has loudly complained about the Delaware corporate law court and has moved all of his companies incorporations to either Nevada or Texas. Delaware’s position as the premiere goal for community companies’ legal domiciles has since become a lingering issue for the state.

Last month, Musk posted on his social media platform X: “When there are egregiously incorrect legal judgments in a single state that substantially damage American citizens in all other 49 states, the Federal government should receive immediate corrective action.”

Lawyers for the shareholder who brought the original suit were also awarded $345mn in fees, instead of the $5.6bn in Tesla shares that they had requested, according to Monday’s selection.

Lawyers at the firm Bernstein Litowitz, who had represented the Tesla shareholder who brought the suit, had said that based on the $56bn worth of the cancelled distribute grant, they were owed $5.6bn in shares. McCormick rejected that, however. She said that the lower amount of $345mn, payable in money or Tesla distribute, was sufficient, estimating that the worth returned to shareholders was closer to $2.3bn, pointing to an monetary reporting fee it took in 2018.