This is the decision of a Delaware judge that could cost Elon Musk $56 billion

A Delaware court has denied Elon Musk a $56 billion compensation package, overruling the decision of some Tesla shareholders to offer the CEO the generous sum. The case surrounds problems in how Musk’s 2018 negotiation with the board on his compensation violated his fiduciary responsibilities to shareholders, some of whom disagreed strongly with the compensation agreement.

The judge overseeing the case, Chancellor Kathaleen McCormick, stuck to her decision this year, which affirmed that Musk was not eligible for the “Grant” as it is referred to in the legal documents.”

The plaintiffs in the case, Tesla stockholder Richard J. Tornetta Plaintiff, “claimed that Musk breached his fiduciary duties as a controlling stockholder and that the Director Defendants breached their fiduciary duties as directors,” according to the opinion released by the court today.

Musk makes his move

Chancellor McCormick corrects the record on how some have interpreted her earlier opinion, stating that “the court did not find that the Board should have paid Musk nothing” and added that “there were undoubtedly a range of healthy amounts that the Board could have decided to pay Musk.” Her decision to strike down the board decision relates to the Board’s inability to “prove that those terms were entirely fair” in her courtroom.

After the initial ruling against Musk, he attacked the Delaware courts on his social media platform X, formerly known as Twitter, which he was ironically forced to purchase because of a Delaware court decision. In the post, Musk warns that he is considering moving Tesla’s corporate headquarters to Texas.

This led Tornetta to file four emergency motions, but they were struck down when Tesla’s legal representatives said they would not move to Texas to evade a decision from the Delaware court. However, when shareholders were asked about relocating the corporation at the same meeting, they also voted on the compensation package that had been struck down. Then, later in court, Tesla’s legal term tried to argue that “stockholder ratification [serves] as a powerful elixir that could cure fiduciary wrongdoing,” with Chancellor McCormick noting that the rule does not apply to those “harmed by the wrongdoing, but [instead] for the wrongdoers.” She found these arguments unconvincing and stuck to her initial ruling that the compensation package was an abdication of Musk’s fiduciary responsibilities.

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