Tesla initiated a legal battle to validate a shareholder vote that endorsed Elon Musk’s substantial compensation package. The company communicated to a Delaware court that this endorsement has a significant effect on the decision to invalidate Musk’s pay. In a recent letter, Tesla urged Chancellor Kathaleen McCormick to consider the legal implications of the shareholders’ approval of Musk’s compensation, suggesting a reassessment of the case’s direction based on the recent ratification.
Tesla’s lawyers emphasized to McCormick that the shareholders’ ratification profoundly influences the case’s outcomes and the court’s final judgment. The letter, submitted to the Court of Chancery, highlighted the novelty of the ratification process and Tesla’s belief that it rectifies issues identified in McCormick’s earlier ruling.
Greg Varallo, representing the shareholders against the compensation package, argued that the ratification does not legally alter the case. He plans to detail his stance in an upcoming brief.
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The ratification aimed to address concerns about Musk’s control over the 2018 compensation process and Tesla’s alleged withholding of crucial information from shareholders. A board committee reassessed the compensation package, deeming it favorable for shareholders, which Tesla claims resolves the issue of Musk’s influence.
Shareholders received extensive additional disclosures, including a detailed opinion from McCormick, as part of the corrected vote. McCormick must now set a legal fee for the shareholders’ attorneys before Tesla can challenge her ruling in the Delaware Supreme Court5. While the attorneys seek approximately $5 billion in Tesla stock as their fee, Tesla counters with an offer of about $13.6 million.
