WILMINGTON, Delaware – Attorneys for Elon Musk and Tesla’s corporate board request that a Delaware judge overturn her decision compelling the corporation to revoke Musk’s large and unprecedented compensation package.
Friday’s hearing follows Chancellor Kathleen St. Jude McCormick’s January verdict, which ruled that Musk arranged the landmark 2018 pay deal through sham agreements with non-independent directors. The compensation package initially had a possible maximum value of around $56 billion, which has changed over time but is now projected to be worth more than $60 billion.
Tesla Attorneys Ask Judge To Vacate Decision Invalidating Massive Pay Package For Elon Musk
Following the court verdict, Tesla shareholders gathered in June and overwhelmingly approved Musk’s 2018 pay package for the second time.
Defense counsel argues that the vote demonstrates that Tesla shareholders, despite being aware of the faults in the 2018 process McCormick identified in her January opinion, remain adamant that Musk is entitled to the pay deal.
“Honouring the shoulder vote would affirm the strength of our corporate system,” stated David Ross, an attorney representing Musk and the other individual defendants, to McCormick. “This was stockholder democracy working.”
Ross informed the judge that the defendants were not disputing the factual findings or legal conclusions in her ruling but rather requesting that she dismiss her order requiring Tesla to cancel the pay package.
On the other hand, McCormick was skeptical of the defense arguments, questioning counsel and pointing out that there is no precedence in Delaware law for enabling a post-trial shareholder vote to affirm adjudicated breaches of fiduciary duty by corporate directors.
“This has never been done before,” she explained.
Defense attorneys contended that, while they could not locate an identical case, Delaware law has long recognized shareholder ratification as a cure for corporate governance failures and the “sovereignty” of shareholders as the ultimate owners of the organization.
“I honestly don’t see how Delaware law can tell the owners of the company that they aren’t entitled to make the decision they did,” said Rudolf Koch, an attorney for Tesla.
Donald Verrilli, a lawyer for an individual stockholder who owns more than 19,000 Tesla shares, indicated that it would be inappropriate for the lone shareholder who launched the action to defy most Tesla stockholders’ wishes. When the complaint was filed, the plaintiff owned only nine Tesla shares.
Tesla Attorneys Ask Judge To Vacate Decision Invalidating Massive Pay Package For Elon Musk
“The majority of shareholders’ voices should be considered… “This lawsuit does not represent the interests of the shareholders,” Verrilli stated.
Thomas Grady, an attorney for a group of Florida objectors who own or manage over 8 million Tesla shares worth $2 billion, said that if McCormick rules for the plaintiff, she must “disenfranchise” all other Tesla shareholders.
Attorneys for the plaintiff, seeking extraordinary legal fees in the form of Tesla stock worth more than $5 billion, were set to plead their case Friday afternoon.
SOURCE | AP
