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Elon Musk’s massive, multibillion-dollar Tesla pay package was blocked by a judge again

Elon Musk’s record-breaking pay package for serving as Tesla’s CEO was rejected by a Delaware court, despite being approved by Tesla shareholders at a June meeting.

The pay package, now worth around $101 billion based on Tesla’s closing share price Monday, is made up of 303 million Tesla stock options. It had been previously thrown out in January by the same judge, Delaware Chancery Court Chancellor Kathaleen McCormick. The package was worth around $56 billion at the time the judge threw out the package.

Tesla CEO Elon Musk. Allison Robbert/Pool/Reuters/File

At the time, McCormick ruled in favor of the main shareholder in the suit who challenged the package, arguing that Musk and the Tesla board “bore the burden of proving that the compensation plan was fair, and they failed to meet their burden.”

Musk’s attorneys attempted to reverse McCormick’s January decision after the 2018 pay package was re-approved by 84% of shares not held by Musk or his brother, Kimbal Musk, in June.

But on Monday, that motion was denied. McCormick said that although the package was once again ratified by a majority of shareholders, that didn’t mean Musk’s record-breaking payday was in shareholders’ best interests.

“The large and talented group of defense firms got creative with the ratification argument, but their unprecedented theories go against multiple strains of settled law,” McCormick wrote in a scathing opinion.

Musk is not paid a cash salary or bonus for working at Tesla. Rather, Musk, one of the world’s richest people, makes his money through lucrative packages of stock options that allow him to purchase millions of Tesla shares for a fraction of their market price.

McCormick agreed with the argument that the board is too close to Tesla’s CEO, noting that even Musk admitted that he only “negotiated against himself” regarding his own compensation.

McCormick wrote in her opinion that while Musk is entitled to some form of compensation, the ultimate award was not fair to shareholders.

“There were undoubtedly a range of healthy amounts that the Board could have decided to pay Musk,” she wrote. “Instead, the Board capitulated to Musk’s terms and then failed to prove that those terms were entirely fair.”

At the time of the June shareholder vote, Tesla’s board argued that it needed to keep Musk’s pay package in place to keep the CEO fully engaged in running the company. Musk also holds leadership positions at SpaceX, Neuralink, the Boring Company and X.

Musk’s attention has recently been pulled toward Washington, as well. He bet big in the 2024 presidential election, donating millions of dollars to Donald Trump’s campaign and joining him on the trail.

Earlier this month, Trump tapped Musk and former Republican presidential candidate Vivek Ramaswamy to lead the newly formed Department of Government Efficiency, known as DOGE, in the incoming administration. The group will be focused on slashing the federal budget as well as axing government regulations and staffing.

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