Tesla, Musk double down on $56B payday appeal
What could be the motivation for continuing to fight the case?
Tesla CEO Elon Musk and a group of other top executives employed by the electric car company have launched an appeal against a series of court rulings that blocked his $56 billion pay package.
In December, Judge Kathaleen McCormick failed to reverse her original decision to void the package, despite a move by shareholders to reinstate it in June last year.
McCormick, Chancellor of Delaware's Court of Chancery, said Tesla's request to overturn her earlier 2019 decision was fatally flawed, citing misrepresentations made to shareholders.
But this has not prevented Musk and colleagues from coming back for another try. Yesterday, they filed an appeal to the Supreme Court of the State of Delaware against the December Order and Final Judgment entered by McCormick, the January 30, 2024, post-trial opinion, a number of other related legal opinions and "all other rulings and interlocutory orders made appealable."
They are also appealing against the judge's decision to award shareholders' counsel $345 million in fees in the derivative dispute.
The case originated in 2018, when Richard Tornetta, a Tesla shareholder, filed a lawsuit against Musk. The suit made it to a trial in late 2022, which ruled against the package citing disclosure failures and a conflicted board, among other considerations.
In April 2024, the Tesla board asked shareholders to vote on the package. In June, Tesla board chair Robyn Denholm wrote to investors in an attempt to get them to ratify CEO Elon Musk's sizable package, apparently concerned he might leave the Cybertruck maker.
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Later that month, the shareholders duly agreed to the record-breaking pay package again.
However, in her December ruling, McCormick said: "A stockholder vote standing alone cannot ratify a conflicted-controller transaction." Her January ruling found Musk's pay package was invalid because he had too much control over Tesla and influence over the board.
"Even if a stockholder vote could have a ratifying effect, it could not do so here due to multiple, material misstatements in the proxy statement," McCormick said.
Meanwhile, Tesla sales have fallen for the first time in more than a decade. It delivered nearly 1.79 million vehicles in 2024, a decrease of about 1 percent compared to the previous year.
An October statement from the electric vehicle manufacturer said: "Despite sustained macroeconomic headwinds and others pulling back on EV investments, we remain focused on expanding our vehicle and energy product lineup, reducing costs, and making critical investments in AI projects and production capacity. We believe these efforts will allow us to capitalize on the ongoing transition in the transportation and energy sectors." ®