Elon Musk tries again to save his $56 billion pay package
One of the final chapters in Elon Musk’s six-year legal battle to save his $56 billion fortune Tesla Inc.’s compensation package was announced Friday, when the world’s richest man made a final offer to a judge, who ruled the settlement was flawed and voided it.
Delaware Court of Chancery Judge Kathaleen St.J. McCormick hear arguments on whether a June 13 shareholder vote to restore Tesla’s co-founder’s pay plan justifies the change her verdictEarlier this year, she discovered the largest CEO pay package in history had been breached by conflicts of interest and improper disclosure.
“We are asking you to vote,” Tesla attorney David Ross said during the hearing. Just because the board used a flawed process to set Musk’s salary, stakeholders “should not be prevented” from approving the compensation package, he said.
However, when questioned from McCormickRoss acknowledged that investor votes were never used to influence a post-trial ruling under Delaware law. The judge is not legally obligated to recognize the vote, but she could consider it. If she upholds her previous decision, Musk, Tesla’s CEO, could ultimately appeal the decision to the Delaware Supreme Court.
“The real question is whether shareholders can ratify” directors’ breaches of their legal duties after a judge called them out after trial, McCormick said during the hearing, expressing her skepticism about the arguments Musk and Tesla made.
Musk’s lawyers argued that the Tesla investors’ proxy vote addressed concerns raised by the judge, including concerns about Director of the company who approved the billionaire pay plan and disregarded the interests of shareholders.
Rudolf Koch, an attorney for Tesla’s board, said if McCormick skipped the June proxy vote, she would be at odds with state corporate laws focused on protecting shareholders. “I don’t see how Delaware law can tell the owners of a company that they can’t make their own decisions” about how much CEO pay should be, Koch told the judge.
Lawyers for Richard Tornetta, a Tesla investor who challenged Musk’s pay as a waste of company assets, argued that the shareholder vote was irrelevant to the case and that the company’s measures to address the issues the judge identified were inadequate.
In legal filings, Tornetta’s lawyers argued that the latest proxy vote was influenced by Musk’s threat to leave Tesla if his pay plan was not restored and take some of the company’s artificial intelligence assets with him.
During the hearing, Greg Varallo, Tornetta’s lead attorney, said there were serious questions about the legality of the most recent shareholder vote.
“Our law does not say that shareholders can overrule the court,” Varallo said, adding that the defense’s arguments, while creative, were contrary to current corporate charters.
McCormick said she would seek to issue her decision in the case “in a timely manner.” The ruling will also include her decision on Tornetta’s attorneys’ request for a legal fees for winning the lawsuit and being paid $7 billion in Tesla stock.
McCormick’s courtroom in Wilmington, Delaware, was packed with lawyers, reporters and onlookers for what could be the final hearing in a case that began with Tornetta’s lawsuit in 2018. Neither Musk nor Tornetta were present.
The unprecedented case has captured the attention of the world. More than 8,000 Tesla shareholders have sent a letter to McCormick sharing their opinions on her pay ruling. And Musk was so angry about the judge’s decision to block his pay packages that he he moved Tesla moves headquarters from Delaware to Texas.
The case is Tornetta v. Musk, 2018-0408, Delaware Court of Chancery (Wilmington).
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