A Delaware judge has cleared the way for Elon Musk and Tesla to begin a legal appeal process for Musk’s 2018 pay package. The appeal process is a key step in the company’s attempt to try and reinstate the CEO’s $56 billion high-risk, high-reward compensation plan.
Tesla has previously announced that it would be appealing Delaware Chancellor Kathaleen McCormick’s ruling, which overruled a vote from a majority of Tesla shareholders.
Key updates:
- Chancellor Kathaleen McCormick of the Court of Chancery recently issued an order that opens a 30-day window for an appeal to be filed with the Delaware Supreme Court, as noted in a Reuters report.
- With this, Elon Musk and Tesla’s board that approved the CEO’s 2018 compensation plan could appeal McCormick’s ruling in January.
- Tesla also has the opportunity to appeal McCormick’s order that required Tesla to pay $345 million to the attorneys who represented Richard Tornetta, a TSLA shareholder with nine shares who initiated the lawsuit in 2018 in protest against Musk’s pay package.
Judge’s concerns:
- McCormick has alleged that Musk and the Tesla board breached their fiduciary duty to investors by approving a pay package that she described as “unfathomable” in size.
- Tesla shareholders ratified Elon Musk’s 2018 compensation plan at the company’s 2024 Annual Shareholders Meeting. The ratification was achieved by a large majority of TSLA stockholders.
- Despite the Tesla shareholders’ ratification, McCormick declined to reconsider her January ruling earlier this month.
A Delaware judge just overruled a supermajority of shareholders who own Tesla and who voted twice to pay @elonmusk what he’s worth.
The court’s decision is wrong, and we’re going to appeal.
This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware…
— Tesla (@Tesla) December 2, 2024
Tesla’s rebuttal:
- Tesla responded by stating that it would be appealing the judge’s decision.
- “A Delaware judge just overruled a supermajority of shareholders who own Tesla and who voted twice to pay Elon Musk what he’s worth. The court’s decision is wrong, and we’re going to appeal. This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners – the shareholders,” Tesla wrote in its official account on X.
- Reuters noted that the Delaware Supreme Court can take about a year to issue a ruling on such appeals.
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