In a legal maneuver to thwart Tesla CEO Elon Musk’s attempt to sidestep a Delaware court’s decision, a shareholder has filed a motion urging a judge to prevent the electric carmaker from relocating its legal domicile to Texas. Following a successful lawsuit that invalidated Musk’s staggering $56 billion compensation package, Richard Tornetta’s legal team seeks to maintain jurisdiction over the matter, particularly as Tesla plans to hold its annual meeting on June 13, where shareholders will vote on shifting incorporation to Texas and approving Musk’s controversial 2018 pay deal.
Emphasizing the significance of Delaware’s jurisdiction in Tesla’s legal affairs over the past two decades, Tornetta’s representatives argue against allowing the company to evade accountability by relocating. They assert that such a move would undermine years of litigation and disregard the court’s authority. Notably, Delaware Chancellor Kathaleen McCormick is urged to rule on this matter promptly.
Musk and Tesla have yet to provide a response to these latest legal developments.
The crux of the lawsuit revolves around McCormick’s January decision to nullify Musk’s lucrative compensation package, deeming it “unfathomable.” The judge highlighted the lack of independence within Tesla’s board during the negotiation process and criticized the company for withholding vital information from shareholders ahead of the 2018 vote.
Despite the setback, Tesla has not relented. In a bid to salvage the pay deal, the company has turned to an unconventional legal tactic, seeking shareholder approval to “ratify” Musk’s 2018 compensation. By doing so, Tesla aims to keep Musk incentivized and potentially contest the substantial attorneys’ fees sought by Tornetta’s legal team.
In a twist of fate, Tesla’s announcement of optimistic sales forecasts for the year, coupled with plans to introduce more affordable models in 2025, provided a much-needed boost to investor confidence, causing shares to surge over 10% in early trading on Wednesday.
As the legal battle ensues, the outcome remains uncertain, with both sides digging in their heels for a protracted struggle over corporate governance and executive compensation.
