A Delaware judge has ruled against Tesla CEO Elon Musk receiving a US$56 billion (A$86.5 billion) pay package, despite the company’s shareholders voting in favour of the landmark compensation deal earlier this year.
In January, Chancellor Kathaleen McCormick of the Court of Chancery blocked the stock compensation package – which would see Mr Musk paid the enormous sum across a 10-year period – after the performance-based award had been approved by Tesla shareholders in 2018.
When it was originally approved by Tesla’s shareholders, the company’s shares were worth less than US$25 (A$38). They’re now worth more than US$350 (A$541) each, and the carmaker is the largest EV manufacturer in the world.
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Tesla and Mr Musk started a campaign in April to once again ask shareholders to vote for his proposed compensation package, which was approved in June – alongside proposals to declassify the Tesla board and introduce a simple majority voting system for company decision making.
However, Bloomberg Law reports Chancellor McCormick overnight ruled Mr Musk isn’t entitled to the pay package, while also ordering Tesla to pay its attorneys US$345 million (A$532.8 million) in either cash or the company’s stocks.
“There were undoubtedly a range of healthy amounts that the board could have decided to pay Musk,” Chancellor McCormick said, according to the publication.
Mr Musk now has 30 days to file an appeal, though the decision could have larger ramifications for Tesla.
Some large US corporations such as Tesla and Facebook are incorporated in Delaware due to its lax taxation approach towards companies which don’t do business in the state.
In April, Tesla chairperson Robyn Denholm called for the company’s shareholders to vote in favour of a proposed move to incorporate the company in Texas – which would be aligned with its new headquarters in Austin.
“2024 is the year that Tesla should move home to Texas,” Ms Denholm said in a letter submitted to the US Securities and Exchange Commission.
“We have a significant number of manufacturing, operations, and engineering employees in Texas, and our executives are based there.
“Texas is where we should continue working towards our mission of accelerating the world’s transition to sustainable energy, as we lay the foundation for our growth with our ramp and build of factories for our future vehicles and to help meet the demand for energy storage as well as with our progress in artificial intelligence via full self-driving and Optimus.
“We have received letters from thousands of Tesla stockholders – large and small – supporting a move home to Texas. We have heard you, and now we formally ask that you speak in a meaningful way: and vote in favour of taking Tesla to our business home of Texas.”
Mr Musk’s future at Tesla has also previously been questioned, especially on the back of the proposed compensation deal.
The outspoken executive has been appointed by US President-elect Donald Trump to co-lead the new “Department of Government Efficiency”, however details of his role have yet to be formally announced.
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