The ongoing legal clash over Elon Musk’s staggering $56 billion pay package has reached a boiling point, with Tesla (TSLA.O) and its critics at odds over how to resolve the complex legal situation. The CEO’s compensation has drawn sharp scrutiny, with billions of dollars in potential legal fees hanging in the balance.
In a recent court filing, Tesla urged a Delaware judge to validate a shareholder vote in favor of Musk’s pay package, aiming to overturn a January ruling that nullified the compensation. Shareholder attorneys, however, countered that the vote lacks legal standing and insisted that Tesla’s only recourse is to appeal to the Delaware Supreme Court.
Before any appeal, Chancellor Kathaleen McCormick must decide on the legal fees Tesla owes to the shareholder attorneys for their victory in the case. Initially, these attorneys sought 29 million Tesla shares, valued at over $5 billion, but on Friday they proposed a cash alternative of at least $1.1 billion, a sum they claim is still “unfairly low.”
The lawsuit, initiated by shareholder Richard Tornetta, challenges the validity and fairness of Musk’s pay package. The contention has created significant uncertainty regarding Musk’s future with Tesla, especially as the company faces slowing sales and increased competition.
On June 13, Tesla investors overwhelmingly supported the stock option package for Musk, citing the tenfold increase in the company’s value since the pay deal was first struck in 2018. Tesla argued that this vote, along with an independent board review, rectifies the issues highlighted by Chancellor McCormick, who had previously ruled that Musk exerted undue influence over the pay negotiations and that shareholders were not fully informed during the 2018 vote.
Despite Tesla’s assertions, Tornetta’s legal team has dismissed the company’s claims, arguing that the ratification vote process was flawed and the shareholder vote was compromised by Musk’s implicit threats to divert products away from Tesla.
With the legal fee decision pending, the resolution of this high-stakes case remains uncertain. At the latest share price of $182.19, Musk’s pay package is valued at approximately $48 billion, down from its initial $56 billion valuation when the final milestone was achieved. Tesla continues to push for the fee dispute to be set aside, hoping the shareholder vote’s validation will lead to a favorable outcome in the case.
