Tesla has expressed its intention to challenge a Delaware judge’s decision to void CEO Elon Musk’s $56 billion compensation package despite the pay plan being approved by shareholders twice. In a statement on X, Tesla described the court’s ruling as “wrong,” asserting that it would appeal the decision.
“A Delaware judge just overruled a supermajority of shareholders who own Tesla and who voted twice to pay Elon Musk what he’s worth. The court’s decision is wrong, and we’re going to appeal. This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners – the shareholders,” Tesla wrote in a post on X.
The Delaware Court of Chancery, in its original ruling, found that the compensation package was flawed due to Musk’s alleged influence over Tesla’s board, which included several of the CEO’s close associates. Despite a subsequent shareholder vote in June to ratify the package, which ended with TSLA stockholders overwhelmingly approving the CEO’s pay package a second time, Chancellor Kathaleen McCormick rejected this vote in a recent ruling.
“Even if a stockholder vote could have a ratifying effect, it could not do so here… Were the court to condone the practice of allowing defeated parties to create new facts for the purpose of revising judgments, lawsuits would become interminable,” McCormick’s opinion read, as noted in a CNBC report.
McCormick also approved a $345 million attorney fee award for the lawyers of plaintiff Richard Tornetta, who held nine TSLA shares when he filed a legal action against Musk’s 2018 compensation plan. Tornetta’s attorneys had initially demanded 29,402,900 shares of TSLA for their compensation, which was worth about $5.1 billion at the time. The attorneys later noted that they would be amenable to a cash award of $1.44 billion instead.
Elon Musk shared his sentiments on X, stating, “Shareholders should control company votes, not judges.” Musk also described the whole scenario surrounding his pay package as a case of “lawfare.” Ultimately, Tesla’s appeal process could potentially take the case to the Delaware Supreme Court, potentially extending the electric vehicle maker’s legal battle over months or potentially even years. And Musk’s compensation, at least for now, remains in legal limbo.
Judge Kathaleen McCormick’s new opinion on Elon Musk’s compensation plan can be viewed below.
Tesla – Post-trial Decision 2 by Simon Alvarez on Scribd
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