Electric vehicle giant Tesla has started taking initial steps to challenge a Delaware Judge’s ruling on Chief Executive Elon Musk’s compensation package.
Tesla CEO wins shareholder votes
CEO Elon Musk has just secured Tesla shareholders’ approval for his $56 billion compensation package on June 13.
Tesla announced the shareholders’ vote results: about 73% voted in favor of CEO Elon Musk’s pay package.
With the favorable vote results, Tesla is now trying to encourage Delaware Judge Chancellor Kathaleen McCormick to review her previous ruling on CEO Musk’s pay deal.
Tesla challenges court ruling
Tesla and its legal team reportedly filed a letter arguing for reconsideration on Friday.
The letter included an appendix providing the shareholder vote results on Tesla’s proposals at the 2024 Annual Stockholders Meeting, including CEO Musk’s 2018 pay deal and incorporation from Delaware to Texas.
The legal team argued that the recent vote results could counter the claims and issues raised by stockholder Richard Tornetta. Tornetta had nine shares when he filed the lawsuit against the Tesla CEO’s compensation package.
Interestingly, Tornetta’s legal team is seeking compensation of more than 27 million TSLA shares (over $5 billion) for their efforts in the legal battle.
Presented below is the context of the letter:
| “Following the fully informed Ratification vote, which embodies the will and sound business judgment of Tesla’s stockholders, the Ratification is now effective. As previously noted in our letters to Your Honor on April 17 and April 25, 2024, and in Tesla’s May 7, 2024 Consolidated Opposition to the Three Motions, the approval of Ratification by Tesla’s stockholders significantly impacts the claims and issues in this action, including the Court’s final judgment, Plaintiff’s Fee Petition, and the timing and topics to be covered in connection with the hearing on the Fee Petition and judgment currently scheduled for July 8, 2024. Consequently, Tesla respectfully suggests that the parties meet and confer on a proposed path forward, including a potential revised schedule (subject to approval by the Court) to permit the parties to detail their respective positions. We conferred with counsel for the individual defendants, and they join in this request.” |
Implication on Tesla
Tesla investors hope that the ratification of CEO Musk’s 2018 compensation package could inspire him to focus his attention more on the electric vehicle automaker over his other ventures.
Tesla shares have dropped amid the waning demand for electric vehicles in recent years, and investors have been growing doubt about CEO Musk’s leadership since he bought X.
The approval would also ensure CEO Musk’s commitment to advance Tesla’s Artificial Intelligence development. Considering that Musk also founded the AI startup xAI, he previously threatened to make AI and robotic products outside Tesla if he failed to secure 25% of the voting power.
You can read the full letter from Tesla’s legal team below:.
