Musk’s $56Billion Pay: Tesla, Critics Clash Over Legal Dispute

Musk's $56Billion Tesla Pay

Tesla (TSLA.O) and opponents of Elon Musk’s compensation clashed on Friday over how to resolve the legal issues surrounding the CEO’s $56 billion pay package and the billions of dollars in potential legal fees generated by the case.

Tesla, in a court filing, urged a Delaware judge to recognize the vote by Tesla shareholders in favor of the pay package and to reverse her January ruling that voided the compensation. In response, shareholder attorneys argued that the vote to ratify Musk’s pay has no legal effect and stated that the only way for Tesla to challenge the January ruling is to appeal to the Delaware Supreme Court.

The shareholder attorneys asserted that before Tesla can appeal, Chancellor Kathaleen McCormick must determine the legal fee Tesla should pay them for winning the case. Previously, they had requested 29 million shares of Tesla stock, valued at over $5 billion. On Friday, they proposed an alternative payment of at least $1.1 billion in cash, which they considered “unfairly low” but justified by court precedent.

Tesla and Richard Tornetta’s legal team, who sued over the pay package, have been debating the best way to resolve the case and compensate the company’s chief executive. Earlier this year, Musk expressed a preference for building some products outside Tesla unless he had a larger stake in the company, creating uncertainty about his future while Tesla faces slower sales and stiffer competition.

On June 13, Tesla’s investors voted in favor of the stock options package, with many investors believing Musk deserved the reward due to the company’s value increasing more than tenfold since the pay package was originally agreed upon in 2018. Tesla urged the judge to prioritize determining the impact of the shareholder vote, which could significantly reduce the legal fee. The company also announced plans to file a motion to reverse the January ruling, believing it should now win the case.

Tesla argued that by having an independent board member review the pay package and reapproving it through a shareholder vote, it addressed McCormick’s finding that Musk dominated the pay negotiations and that shareholders lacked crucial information in the 2018 vote. Tornetta’s legal team rejected this approach, claiming the board process for proposing a ratification vote was flawed, Tesla misused the law, and Musk coerced the shareholder vote by threatening to take potential products from Tesla.

The shareholder lawyers want a decision on their legal fee as the next step in the case. When Tesla achieved the last milestone in the pay package, it was valued at $56 billion. The package is currently worth around $48 billion, with Friday’s share price at $182.19.