Tesla tells judge that shareholder vote should reverse Musk pay ruling

By Tom Hals

WILMINGTON, Delaware (Reuters) – A Delaware judge should recognize a vote by Tesla shareholders in favor of Elon Musk’s $56 billion pay package and reverse her January ruling that voided the compensation, the company said in a filing that was made public on Friday.

In addition, Chancellor Kathaleen McCormick should not consider a request for a record $6 billion legal fee by the lawyers that led the case against Musk’s 2018 pay package, according to the filing in Delaware’s Court of Chancery.

Tesla and the legal team for Richard Tornetta, the shareholder who sued over the pay package, are wrestling over the best way to resolve the case and compensate the company’s chief executive.  

Musk said earlier this year that unless he had a larger stake in Tesla he would prefer to build some products outside the company, creating uncertainty about his future while Tesla is struggling with slower sales and stiffer competition.

Tesla’s investors voted on June 13 in favor of the package of stock options. Many investors said they felt Musk should be rewarded because the value of the company increased more than 10 times after the pay package was originally agreed in 2018.     

Tesla said in the court filing that the judge should determine the impact of the shareholder vote, which in turn could drastically reduce the legal fee.

It said that it plans to make a motion to reverse the January ruling and that it should now win the case.

The company has argued that by having the pay package reviewed by an independent board member and reapproved by shareholders it fixed McCormick’s finding that Musk dominated the pay negotiations and that shareholders lacked key information in the 2018 vote.

Tornetta’s legal team has rejected that approach. They argued the shareholder vote on Musk’s pay had no legal impact and even Tesla has acknowledged that the process to reverse a legal opinion through a vote was “novel.”

The shareholder lawyers want a decision on their legal fee as the next step in the case.

When the company achieved the last milestone in the pay package, it was worth $56 billion, according to Tesla. The package is worth around $48 billion at Friday’s share price of $182.19.

(Reporting by Tom Hals in Wilmington, Delaware; Editing by Matthew Lewis)