Tesla (NASDAQ:TSLA) has initiated legal efforts to reinstate Elon Musk’s record compensation following a shareholder vote in favor of his pay package. The company informed Delaware Chancellor Kathaleen McCormick that the recent ratification significantly impacts her earlier ruling that voided the compensation, according to a letter made public on Monday.
In the letter, Tesla’s attorneys argued that the approval by Tesla shareholders should now shape the legal arguments moving forward, rather than continuing with the case on its previous schedule. “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 the shareholders challenging the pay package, countered that the ratification had “no legal effect” on the case. He plans to outline his arguments in a brief due Friday.
Tesla described the ratification process as “novel” and expressed uncertainty over whether McCormick and the Delaware Supreme Court would recognize the result. Tesla maintains that the ratification has resolved the issues highlighted in McCormick’s January ruling. The judge had previously found that Musk controlled the 2018 process leading to the pay package and that Tesla had withheld crucial information from shareholders regarding the ease of meeting the performance targets necessary for Musk’s compensation.
A special board committee reviewed the pay package and concluded it was in shareholders’ best interest, which Tesla argued addressed the concerns of Musk’s influence over the process. The vote was amended with additional disclosures, including McCormick’s 200-page opinion, to correct the information provided to shareholders.
McCormick also needs to set 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 the appropriate fee should be around $13.6 million.
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