Delaware Court Blocks $100 Billion Compensation for Elon Musk

A Delaware court upheld its decision to block Tesla’s 2018 compensation plan for CEO Elon Musk, valued at over $100 billion today. Chancellor Judge Kathaleen McCormick ruled on Monday that the compensation package was improperly approved, despite overwhelming shareholder support.

The plan, originally valued at $56 billion, was tied to Tesla’s financial milestones, including stock value and profitability. Under Musk’s leadership, Tesla reached a market cap of nearly $1.1 trillion, far exceeding the benchmarks in the package. In June, Tesla shareholders reaffirmed their approval of the compensation, with 77% voting in favor. McCormick dismissed the vote, stating it could not “ratify” prior decisions.

Musk criticized the ruling on X, his social media platform, saying, “Shareholders should control company votes, not judges.” Musk has since moved Tesla, SpaceX, and Neuralink’s incorporations out of Delaware, citing dissatisfaction with its judicial and political environment.

Judge McCormick also approved $345 million in attorney fees for lawyers who challenged the compensation, further fueling criticism of the court’s decision. Musk reposted critiques on X, including fund manager Cathie Wood’s claim that McCormick acted as “an activist judge.”

Delaware’s business-friendly reputation has been questioned recently. Critics point to its ties to progressive Environmental, Social, and Governance (ESG) policies and political connections, including its association with President Joe Biden. Reports show a decline in new corporate incorporations in Delaware, with a 6% drop in 2022.

This ruling is seen by Musk and others as a blow to shareholder rights. Musk continues to urge businesses to reconsider incorporating in Delaware, calling it a “politicized environment.”

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