Democrat-Appointed Judge Blocks Elon Musk’s Shareholder-Approved Compensation

In a stunning move, a Delaware judge has blocked Tesla CEO Elon Musk from receiving a multibillion-dollar compensation package overwhelmingly approved by the company’s shareholders not once, but twice. The ruling, handed down by Chancellor Kathaleen McCormick of the Delaware Court of Chancery, has sparked outrage from Tesla and its investors, who view the decision as an overreach into shareholder rights.

The compensation package, initially approved in 2018, stipulated Musk would only receive the stock options then valued at $50 billion if Tesla’s stock price soared and its sales and earnings grew dramatically. Thanks to Tesla’s success, the package is now worth more than $100 billion. Despite these achievements, McCormick ruled the deal “unfair,” setting off a legal battle that culminated in this week’s decision.

Key Facts About the Case:

• Shareholder Approval: 77% of Tesla shareholders voted in favor of the package in June 2023, after McCormick initially rejected it earlier this year. This was the second time the shareholders reaffirmed their support for Musk’s compensation.

• Judicial Overreach Alleged: Tesla criticized the decision, stating on X (formerly Twitter), “A Delaware judge just overruled a supermajority of shareholders who own Tesla and who voted twice to pay @elonmusk what he’s worth.”

• Lavish Legal Fees: The court awarded $345 million to the plaintiff’s attorneys, equivalent to an eye-popping $17,692 per hour, citing the challenges they faced going against “some of the best law firms in the country.”

Tesla announced plans to appeal the ruling, warning that it establishes a dangerous precedent. “This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners the shareholders,” the company stated.

A Proven Track Record of Success:

Even critics of Musk, including The New York Times, have acknowledged that he surpassed the ambitious goals required to earn the compensation package. Tesla has transformed the electric vehicle market under his leadership, with record-breaking sales and soaring stock prices silencing skeptics.

The broader implications of McCormick’s decision extend beyond Tesla. By undermining shareholder-approved decisions, this ruling could shake the foundations of corporate governance in Delaware a state where many of America’s largest companies are incorporated.

For Tesla’s investors, the message is clear: their votes and voices have been disregarded in favor of judicial activism. The case is now poised to test the limits of shareholder rights and the proper role of courts in corporate decision-making.

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