Summary
- Delaware Chancellor denied Elon Musk’s $56 billion pay package again
- Shareholders initially voted to award Musk the money for achieving company growth tranches
- Musk’s pay package decision to come before end of the year
- Musk’s pay package challenged by shareholder Richard J. Tornetta
- Tesla to pay $345 million in fees to lawyers representing shareholders, plans to appeal the decision
Article
Delaware Chancellor Kathaleen McCormick once again denied Tesla CEO Elon Musk’s $56 billion pay package, which had initially been rejected in January. The package was awarded to Musk based on achieving various company growth tranches, but was challenged by shareholder Richard J. Tornetta, who owned only a small number of Tesla shares. Despite an overwhelming vote by Tesla shareholders in favor of awarding Musk the money, McCormick ruled against it a second time.
The decision by Chancellor McCormick has sparked controversy, as Tesla is now facing having to pay $345 million in fees to lawyers representing Tornetta and other shareholders. The lawyers had initially requested over $5.5 billion in Tesla stock. They expressed hope that McCormick’s ruling would end the matter for Tesla shareholders, but are prepared to defend the judgment if the company decides to appeal.
In response to the ruling, Tesla criticized the decision, stating that a Delaware judge had overruled the majority of shareholders who had twice voted in favor of paying Musk what he was worth. The company believes that judges and plaintiffs’ lawyers are now essentially running Delaware. The situation has been described as a threat to capitalism by some, including Vivek Ramaswamy, due to the implications of judges potentially overturning shareholder decisions.
Chancellor McCormick, in her ruling, questioned the validity of using a shareholder vote and subsequent board vote to reinstate the pay package for Musk, stating that it was not a reasonable way to go about it. She emphasized the potential consequences of allowing defeated parties to manipulate facts in order to alter judgments, which would lead to never-ending lawsuits. Tesla has indicated that it will be appealing McCormick’s decision, despite the additional legal fees that the company will now have to pay.
Overall, the ongoing battle over Tesla CEO Elon Musk’s $56 billion pay package demonstrates the complex interplay between shareholder decisions, legal challenges, and judicial rulings. The situation highlights the potential risks and consequences of relying on shareholder votes to approve executive compensation packages and the power that individual shareholders and judges may have in influencing such decisions. The outcome of the appeal and the broader implications for Tesla and corporate governance more generally remain to be seen.
Read the full article here
