Elon Musk faces a significant legal setback as U.S. Chancellor Kathaleen McCormick upheld her decision to reject his $55.8 billion compensation package at Tesla on December 2, 2024. The judge ruled that a June shareholder vote could not restore the package, which she deemed excessive and unfair to shareholders. McCormick identified 'material misstatements' in the documents provided to shareholders, which contributed to her ruling [37cc0808].
In addition to this ruling, the court awarded $345 million in attorney fees to the plaintiffs, significantly less than the $5.6 billion they initially requested. The lawsuit was brought by shareholder Richard Tornetta, who accused Musk of 'unjustified enrichment' and claimed that he dictated the terms of the compensation package to the board of directors [37cc0808]. Musk, however, defended himself by arguing that Tesla investors were sophisticated enough to monitor his management and denied any involvement in creating the compensation package [37cc0808].
This ruling comes at a time when Musk is also dealing with other legal challenges, including a recently dismissed lawsuit regarding severance payments to former Twitter employees. A U.S. District Judge ruled that Musk's refusal to pay at least $500 million in severance was not covered under the federal Employee Retirement Income Security Act, marking a significant victory for the billionaire amid ongoing legal scrutiny [6522dcf6].
Furthermore, the Securities and Exchange Commission (SEC) had sought sanctions against Musk for missing a deposition related to his $44 billion acquisition of Twitter. However, U.S. District Judge Jacqueline Scott Corley denied the SEC's request, stating that Musk's subsequent testimony rendered the SEC's request moot. Musk had reimbursed the SEC for travel costs incurred due to his absence, which he attributed to a SpaceX mission [5165f16c]. The SEC had argued that Musk violated a court order from May 31, 2024, but Judge Corley deemed sanctions unnecessary [5165f16c].