Summary
- Tesla intends to challenge a Delaware judge’s decision on Elon Musk’s $56 billion compensation package
- The court’s ruling was described as wrong by Tesla and it plans to appeal the decision
- Despite shareholder approval, the Delaware Court of Chancery voided Musk’s compensation plan
- Musk’s lawyers were awarded $345 million in attorney fees
- Musk expressed that shareholders should control company votes, not judges, and referred to the situation as "lawfare"
Article
Tesla intends to challenge a Delaware judge’s decision to void Elon Musk’s $56 billion compensation package despite the plan being approved by shareholders twice. The company criticized the court’s ruling, stating that it would appeal the decision, arguing that judges and plaintiff lawyers should not run Delaware companies instead of shareholders. The Delaware Court of Chancery found the compensation package flawed due to Musk’s alleged influence over Tesla’s board, leading to Chancellor Kathaleen McCormick rejecting a subsequent shareholder vote to ratify the package.
Despite shareholders overwhelmingly approving Musk’s pay package a second time in June, McCormick rejected the vote, citing that allowing defeated parties to create new facts for the purpose of revising judgments would make lawsuits interminable. She also approved a $345 million attorney fee award for the lawyers of plaintiff Richard Tornetta, who had sued Musk over his 2018 compensation plan. Tornetta had initially demanded shares of TSLA for their compensation, which was worth about $5.1 billion at the time, but later settled for a cash award of $1.44 billion.
Elon Musk expressed his disapproval of the ruling, stating that shareholders should control company votes, not judges, and described the situation as a case of “lawfare.” The appeal process could potentially take the case to the Delaware Supreme Court, extending Tesla’s legal battle over months or even years. Musk’s compensation remains in legal limbo as the company continues to challenge the court’s decision. Judge Kathaleen McCormick’s opinion on Elon Musk’s compensation plan can be viewed online, highlighting the ongoing legal dispute between Tesla and the courts.
Tesla’s decision to challenge the judge’s ruling reflects the company’s commitment to defending Musk’s compensation package, which was approved by shareholders. The legal battle highlights the complex dynamics between corporate governance, shareholder rights, and judicial oversight. As the appeal process unfolds, Tesla will continue to navigate the legal system to secure a resolution that aligns with the interests of its shareholders and maintains the integrity of its compensation practices. The outcome of the case could have far-reaching implications for corporate governance and executive compensation in the future.
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