Tesla shareholders have voted twice to hand Elon Musk a $56 billion pay package but a Delaware judge has blocked it, again.
For the second time, Delaware Chancery Court Judge Kathaleen McCormick has shut down Tesla’s attempts to reinstate the package - which would make Musk the highest-paid executive ever.
Despite shareholders reaffirming their support to 're-ratify' the deal, McCormick ruled that the initial January decision - declaring the negotiations around the package improper - still stands.
The judge reconsidered the case after Musk's attorneys showed a 70% vote in support of the compensation package.
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In her detailed 103-page opinion, McCormick pointed out that Tesla’s legal team’s arguments were full of 'fatal flaws' including Musk's overwhelming influence on the board and the lack of board member independence.
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“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.
While Tesla’s lawyers claimed that 'stockholders hold the power to adopt any corporate acts they deem in their own best interests,' McCormick dismissed this as 'dubious generally and unquestionably false.'
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The Tesla CEO has since taken to X to voice his side.
He reposted comments from tech investor Paul Graham, warning that startups might stop 'incorporating' in Delaware if 'activist judges start overruling shareholders.'
The SpaceX founder also shared a tongue-in-cheek post about "things to do in Delaware - leave" and echoed Cathie Wood's lengthy post which includes the statement: "No judge has the right to determine CEO compensation."
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Tesla announced plans on X to appeal the ruling and is expected to take the case to the Delaware Supreme Court.
The vehicle manufacturer posted: "This ruling, if not overturned, means that judges and plaintiffs' lawyers run Delaware companies rather than their rightful owners - the shareholders."
Though, since the initial ruling, Tesla has reincorporated from Delaware to Texas and some fear Musk's new priorities as he proceeds as President Donald Trump's right-hand man.
As part of the deal, McCormick awarded the plaintiff’s attorneys a $345 million in fees. However, this is a fractionable amount compared to the $5.6 billion that was initially expected.
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Interestingly, the $56 billion compensation package was approved back in 2018 at a time when Tesla was struggling.
The package meant the electric automaker had to hit specific stock milestones to allow Musk to cash in the full value. This proved an easy job after Tesla’s stock skyrocketed with the success of the Model 3 and Model Y projects.