In a recent development, a Delaware judge has paved the way for Elon Musk and Tesla to pursue a legal appeal process for Musk’s controversial 2018 pay package. This appeal process is crucial for the company as it seeks to reinstate the CEO’s $56 billion high-risk, high-reward compensation plan that has been a subject of much debate and scrutiny.
The decision comes after Delaware Chancellor Kathaleen McCormick overruled a vote from a majority of Tesla shareholders, prompting the company to announce its intention to appeal the ruling. Chancellor McCormick’s order has now opened a 30-day window for an appeal to be filed with the Delaware Supreme Court, as reported by Reuters.
Elon Musk and Tesla’s board, who approved the CEO’s 2018 compensation plan, will have the opportunity to appeal McCormick’s ruling in January. Additionally, Tesla can challenge McCormick’s order that required the company to pay $345 million to the attorneys representing Richard Tornetta, a TSLA shareholder with nine shares who initiated the lawsuit against Musk’s pay package in 2018.
Chancellor McCormick raised concerns regarding Musk and the Tesla board allegedly breaching their fiduciary duty to investors by approving a pay package of “unfathomable” size. Despite Tesla shareholders ratifying Musk’s 2018 compensation plan at the company’s 2024 Annual Shareholders Meeting, McCormick declined to reconsider her initial ruling, prompting Tesla to announce its decision to appeal.
In response to the judge’s decision, Tesla expressed dissatisfaction, stating, “A Delaware judge just overruled a supermajority of shareholders who own Tesla and who voted twice to pay Elon Musk what he’s worth. The court’s decision is wrong, and we’re going to appeal.” The company argued that the ruling undermines the authority of shareholders in Delaware companies.
It is worth noting that the Delaware Supreme Court typically takes around a year to issue a ruling on such appeals, indicating that the legal battle over Elon Musk’s compensation package is far from over. As Tesla gears up for the appeal process, the outcome remains uncertain, with potential implications for the future of executive compensation practices in the corporate world.
For more updates on this ongoing legal battle and other news related to Tesla and Elon Musk, stay tuned for further developments. Feel free to reach out to us with any news tips or inquiries.