Tesla initiates legal fight to reinstate Musk's $56B pay package
Tesla has initiated a legal battle to reinstate CEO Elon Musk's record $56 billlion compensation, following a shareholder vote in favor of the pay package. In a letter made public on Monday, Tesla informed Delaware judge Chancellor Kathaleen McCormick that the shareholder vote "significantly impacts" her January ruling which voided Musk's pay. The company urged that the parties involved in the pay package case should now present their legal interpretations of the recent ratification of Musk's pay.
Shareholder vote impacts Musk's compensation case
Tesla attorneys stated in the letter filed with the Court of Chancery that "the approval of ratification by Tesla's stockholders significantly impacts the claims and issues in this action, including the court's final judgment." However, Greg Varallo, a shareholder attorney opposing the pay package, argued that the ratification had "no legal effect" on the case and promised to elaborate his argument in a brief due Friday.
Tesla's response to previous ruling
Tesla has described the ratification process as "novel" and expressed uncertainty over whether McCormick and the Delaware Supreme Court would accept its outcome. The company maintains that this ratification has addressed issues raised in McCormick's ruling in January. The judge had found that Musk controlled the 2018 process leading to his pay package and that Tesla had withheld crucial information from shareholders regarding how easily company targets needed to be met for Musk to receive his pay.
Tesla board's action and shareholder support
In response to these findings, a special committee of Tesla's board reviewed the pay package and determined it was in shareholders' best interest. Tesla argues this action rectified Musk's dominance in the process. Additionally, shareholders were provided with hundreds of pages of added disclosures, including McCormick's 200-page opinion. Nearly three-quarters of shareholders, excluding Musk and his brother, voted in favor of the deal on Thursday, despite opposition from several institutional investors and proxy advisory firms.
