Tesla Inc. (NASDAQ:TSLA) has initiated a legal battle to reinstate a shareholder-approved compensation package for CEO Elon Musk, urging a Delaware judge to consider the significant impact of the shareholder vote in her previous ruling that voided the pay.
In a letter made public on Monday, Tesla asked Chancellor Kathaleen McCormick to allow the parties involved to present their legal interpretations of Thursday’s shareholder ratification of Musk’s pay, rather than proceeding with the case based 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’s attorneys wrote in the letter, which was filed with the Court of Chancery on Friday.
Greg Varallo, representing the shareholders opposing the pay package, argued that the ratification had “no legal effect” on the ongoing case, and he plans to detail his argument in a brief due on Friday.
Tesla described the ratification process as “novel” and expressed uncertainty about whether McCormick and the Delaware Supreme Court would accept the outcome. Tesla contends that the ratification addresses the issues identified in McCormick’s January ruling.
Previously, the judge determined that Musk had undue influence over the 2018 process that resulted in his pay package and that Tesla withheld crucial information from shareholders regarding the achievable targets required for Musk to receive payment.
Tesla claims that a special committee of its board reviewed the pay package and concluded it was in the best interest of shareholders, thereby mitigating concerns about Musk’s dominance in the decision-making process. The shareholder vote was conducted with the addition of hundreds of pages of disclosures, including McCormick’s 200-page opinion.
Before Tesla can appeal McCormick’s ruling to the Delaware Supreme Court, she must also decide on a fee for the shareholder legal team. The shareholders’ attorneys are seeking around $5 billion in Tesla stock as their legal fee, while Tesla argues they should be compensated around $13.6 million.
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