Elon Musk a Delaware court rejected a record salary for serving as Tesla CEO, despite it being approved by Tesla shareholders at the meeting in June.
The pay package, now worth about $101 billion (about AUD 155 billion) based on Tesla’s share price at Monday’s close, consists of 303 million Tesla stock options.
It was previously dismissed in January by the same judge, Delaware Chancellor of the Exchequer Kathaleen McCormick.
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The package was worth about $56 billion ($85 billion) at the time the judge threw out the package.
At the time, McCormick ruled in favor of a major shareholder in a lawsuit challenging the package, arguing that Musk and Tesla’s board “had the burden of proving that the compensation plan was fair, and they failed to meet their burden.”
Musk’s lawyers sought to overturn McCormick’s January decision after the 2018 pay package was reauthorized in June for the 84 percent of shares not held by Musk or his brother, Kimbal Musk.
But on Monday, that proposal was rejected.
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McCormick said that even though the package was once again ratified by a majority of shareholders, that doesn’t mean Musk’s record payout is in the best interest of shareholders.
“A large and talented group of defense firms has been creative with the ratification argument, but their unprecedented theories run counter to multiple types of established law,” McCormick wrote in a scathing opinion.
Musk receives no cash salary or bonus for working at Tesla.
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Instead, Musk, one of the world’s richest men, makes his money through lucrative stock option packages that allow him to buy millions of Tesla shares at a fraction of their market price.
McCormick agreed with the argument that management is too close to Tesla’s CEO, noting that even Musk has admitted to only “negotiating against himself” over his own compensation.
McCormick wrote in her opinion that while Musk is entitled to some form of compensation, the final award is not fair to shareholders.
“There was no doubt a range of healthy amounts that the Board could have chosen to pay Musk,” she wrote.
“Instead, the Board capitulated to Musk’s terms and then failed to demonstrate that those terms were entirely fair.”
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At the time of the shareholder vote in June, Tesla’s board argued that it needed to keep Musk’s pay package in order to keep the CEO fully engaged in running the company.
Musk also holds senior positions at SpaceX, Neuralink, the Boring Company and X.
Musk’s attention has recently also turned to Washington.
He bet big on 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 new administration.
The group will focus on reducing the federal budget as well as reducing government regulations and personnel.