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Elon Musk blasted a Delaware judge over a “totally crazy” ruling that denied him a pay package that is now worth $100 billion — denouncing the move as “absolute corruption.”
Musk reacted on his X social media platform to the ruling on Monday by Court of Chancery Judge Kathleen McCormick, whom the Tesla mogul denounced as an “activist posing as a judge” for defying more than 70% of shareholders who voted in June to approve the compensation package.
McCormick, who was appointed to the chancery by Democratic Delaware Gov. John Carney, upheld her previous decision from January in which she invalidated a pay package for Musk that was valued at the time at $56 billion.
The judge initially ruled that the Tesla board of directors was improperly influenced by Musk during negotiations and that the compensation was excessive.
In June, Tesla shareholders voted to reinstate Musk’s pay package at the company’s annual meeting.
That same month, Tesla followed through on a pledge to leave Delaware and reincorporate in Texas — though Musk’s lawyers assured the Delaware Chancery Court that it would still retain jurisdiction over the matter of the compensation package.
But McCormick on Monday refused to budge from her earlier stance.
“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,” she wrote in her ruling.
Tesla has said it plans to appeal the ruling. Dan Ives, an analyst at Wedbush, predicted that the company will prevail and Musk will get his payday.
Ives called McCormick’s ruling “another Twilight Zone legal move,” adding: “Tesla/Musk we expect will win this case at the Supreme Court as battle rolls on.”
“A Delaware judge just overruled a supermajority of shareholders who own Tesla and who voted twice to pay @elonmusk what he’s worth,” the company said in a post on X.
“This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners — the shareholders.”
McCormick’s ruling elicited backlash not just from Musk but from Tesla bulls as well as business figures who accused her of overstepping her bounds.
“Judge McCormick is an activist judge at its worst,” Cathie Wood, founder and CEO of ARK Invest and a major Tesla shareholder, wrote on X.
“No judge has the right to determine CEO compensation. Shareholders voted twice, overwhelmingly each time, to ratify @elonmusk’s 2018 performance-based pay package. She will lose this fight in Supreme Court.”
Paul Graham, co-founder of the venture capital firm Y Combinator, wrote on X: “It used to be automatic for startups to incorporate in Delaware. That will stop being the case if activist judges start overruling shareholders.”
Graham added in a follow-up post that he was told by the CEO of a public company that “all startups should reincorporate in Nevada.”
“That’s apparently the best alternative, and for startups that are still private it’s trivially easy,” he wrote.
Shaun Maguire, a former Google executive who is now a partner at Sequoia Capital, wrote: “I recommend all future companies to incorporate outside of Delaware.”
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