Tesla Fights Back Against Musk Pay Ruling After Shareholder Approval


Tesla (NASDAQ:TSLA) has filed a legal challenge to reinstate Elon Musk’s record compensation following a shareholder vote that approved his pay package. In a letter to Delaware Chancellor Kathaleen McCormick, the company argued that the recent ratification vote has significant implications for the earlier ruling that voided the compensation.

Tesla’s lawyers contend that the shareholder approval should now be a key consideration in the legal arguments going forward. “The approval of ratification by Tesla’s stockholders significantly impacts the claims and issues in this action, including the court’s final judgment,” the letter stated, filed with the Court of Chancery on Friday.

Greg Varallo, representing shareholders opposing the pay package, disputed Tesla’s claim, asserting that the ratification has “no legal effect” on the case. He intends to present his arguments in a brief due Friday.

Tesla described the ratification process as “novel” and expressed uncertainty regarding McCormick’s and the Delaware Supreme Court’s recognition of the result. Tesla maintains that the ratification has addressed the issues raised in McCormick’s January ruling, which had found that Musk held significant control over the 2018 process leading to the pay package and that Tesla had withheld essential information from shareholders about the feasibility of achieving the performance targets tied to Musk’s compensation.

A special board committee reviewed the pay package and determined it was in the best interest of shareholders, a point Tesla argues addresses concerns about Musk’s influence over the process. The vote was revised to include additional disclosures, including McCormick’s 200-page opinion, to rectify the information provided to shareholders.

McCormick is also required to establish a fee for the shareholder legal team before Tesla can appeal her ruling to the Delaware Supreme Court. The shareholders’ attorneys are seeking approximately $5 billion in Tesla stock as legal fees, while Tesla contends that a more appropriate fee would be around $13.6 million.