One of the final chapters in Elon Musk’s six-year legal battle to save his $56 billion fortune Tesla Inc.’s pay package was disclosed on Friday as the world’s richest man made his final argument before a judge who found the compensation agreement flawed and declared it void.
Judge of the Chancery Court of Delaware Kathaleen St.J. McCormick heard arguments about whether a June 13 shareholder vote to revive Tesla’s co-founder compensation plan warrants a change their verdictEarlier this year, it found that the largest executive compensation package in history was tainted by conflicts of interest and improper disclosures.
“We ask you to comply with the vote,” Tesla attorney David Ross said during the hearing. Just because the board used a flawed process to set Musk’s salary, “shareholders should not be prevented” from deciding whether to ratify the compensation package, he said.
But when asked by McCormickRoss acknowledged that an investor vote has never been used to influence a post-trial decision under Delaware law. The judge is not legally required to recognize the vote, but she can consider it. If she sticks with her earlier ruling, Musk, Tesla’s CEO, may eventually appeal the decision to the Delaware Supreme Court.
“The real question is whether shareholders can condone directors’ breaches of legal duties” after a judge ordered them to do so following a trial, McCormick said during the hearing, expressing skepticism about Musk and Tesla’s arguments.
Musk’s lawyers argue that the Tesla investors’ proxy voting took into account the concerns raised by the judge, including those about Managing Director Whoever approved the compensation plan was beholden to the billionaire and did not care about the interests of the shareholders.
Rudolf Koch, a lawyer for Tesla’s board, said if McCormick sets aside the June proxy, it would violate the state’s corporate laws, which focus on protecting shareholders. “I don’t see how Delaware law can dictate to the owners of a company that they can’t decide for themselves” how much the CEO should be paid, Koch told the judge.
Lawyers for Richard Tornetta, a Tesla investor who denounced Musk’s salary as a waste of company assets, argued that the shareholder vote was irrelevant to the case and that the company’s maneuvers to resolve the problems identified by the judge were inadequate.
In lawsuits, Tornetta’s lawyers argued that the recent proxy vote was manipulated by Musk’s threats that he would leave Tesla if his compensation plan was not reinstated, taking some of the company’s artificial intelligence with him.
During the hearing, Greg Varallo, Tornetta’s lead attorney, said there were serious questions about the legality of the recent shareholder vote.
“Our law does not say that shareholders can overrule court decisions,” Varallo said, adding that while the defense’s arguments were creative, they contradicted existing corporate statutes.
McCormick said she will try to announce her decision in the case “in a timely manner.” The ruling will also include her decision on a motion by Tornetta’s lawyers to have her Legal fees For his victory in the case, he was paid with Tesla shares worth $7 billion.
McCormick’s courtroom in Wilmington, Delaware, was packed with lawyers, reporters and spectators for what may be the final hearing in a case that began with Tornetta’s lawsuit in 2018. Neither Musk nor Tornetta were present.
The unprecedented court case has attracted worldwide attention. More than 8,000 Tesla shareholders sent letters to McCormick expressing their opinion on her salary decision. And Musk was so upset by the judge’s decision to block the salary packages that he moved The state in which Tesla is based has changed from Delaware to Texas.
The case is Tornetta v. Musk, 2018-0408, Delaware Chancery Court (Wilmington).
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