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USA | Jun 17, 2024

Tesla kicks off legal fight to reinstate Musk’s pay

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Elon Musk, Chief Executive Officer of SpaceX and Tesla and owner of X looks on during the Milken Conference 2024 Global Conference Sessions at The Beverly Hilton in Beverly Hills, California, U.S., May 6, 2024. (File Photo: REUTERS/David Swanson)

WILMINGTON, Delaware (Reuters): -Tesla began its fight for legal recognition of a shareholder vote favouring Elon Musk’s record compensation, telling a Delaware judge that it “significantly impacts” her ruling voiding the pay, according to a letter made public on Monday (June 17).

Tesla wrote to Chancellor Kathaleen McCormick that the parties in the pay package case should now lay out their legal interpretations of Thursday’s ratification of Musk’s pay, rather than moving ahead with the case on the prior schedule.

“The approval of ratification by Tesla’s stockholders significantly impacts the claims and issues in this action, including the court’s final judgment,” Tesla attorneys told McCormick in the letter, which was filed with the Court of Chancery on Friday.

Greg Varallo, a shareholder attorney in the case against the pay package, said the ratification had “no legal effect” on the case and that he would explain his argument in a brief due Friday.

The logo of car manufacturer Tesla is seen at a dealership in London, Britain, May 14, 2021. REUTERS/Matthew Childs/File Photo

Tesla has said the ratification process was “novel” and it was unclear if McCormick and the Delaware Supreme Court would accept the result.

Tesla has argued that the ratification has now cured the problems raised in McCormick’s ruling in January.

The judge found Musk controlled the 2018 process that led to the pay package and that Tesla concealed key information from shareholders about the ease of the targets the company had to meet for Musk to be paid.

A special committee of its board reviewed the pay package and determined it was in the best interest of shareholders, which Tesla said fixed the problem of Musk’s dominance in the process.

Chancellor Kathaleen McCormick, Delaware Court of Chancery, speaks during the gathering of top global M&A advisors, including Wall Street’s most high-profile investment bankers and lawyers, at the 35th Annual Tulane Corporate Law Institute in New Orleans, Louisiana, U.S., March 23, 2023. REUTERS/Kathleen Flynn/File Photo

The vote was corrected by providing shareholders with hundreds of pages of added disclosures, including McCormick’s 200-page opinion.

McCormick also has to determine a fee for the shareholder legal team before Tesla can appeal her ruling to the Delaware Supreme Court.

The shareholder’s attorneys are seeking around $5 billion, in the form of Tesla stock as a legal fee and Tesla argued they should be paid around $13.6 million.

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