Tesla Inc has urged the highest court in Delaware to salvage Elon Musk’s record-setting pay package after a lower-court judge rejected it twice, taking his epic legal battle over tens of billions of dollars in stock options to the next level.
Tesla’s lawyers wrote in an appeals brief on Tuesday that the US state’s Chancery Court disregarded the will of shareholders who had signed off on the compensation plan for Tesla’s chief executive officer after Chancellor Kathaleen St J McCormick spiked it the first time.
McCormick’s decision flies in the face of Delaware corporate law — “that when stockholders are empowered to act through free and informed voting, they have the final say over the company they own”, according to the filing in Delaware Supreme Court.
Tesla, Musk and a group of shareholders are appealing a December ruling that struck down the billionaire’s compensation award for the second time. In that ruling, the Chancery Court’s chief judge concluded that Musk had improperly influenced the carmaker’s board to adopt the plan in 2018.
The package is currently worth $63 billion, according to the Bloomberg Billionaires Index.
A separate brief by Musk and other Tesla directors contended that McCormick’s decision was unfair given what the CEO put into the company to meet the goals set by the compensation package.
“Musk cannot ‘unscramble’ the years of work he did to grow Tesla’s value by more than 1,400% in reliance on the award, reclaim the nights he slept on the factory floor or unwork the grueling hours of ‘sheer … pain’ he put in to meet the company’s audacious goals instead of pursuing other career and financial opportunities,” they argued.
The world’s richest person is fighting to recover the largest pay package ever awarded to a US executive, even as he lashes out online at McCormick and her court, urging other major companies to follow his lead and move their incorporation to friendlier courts in Texas or Nevada.
His legal appeal is playing out as Musk’s net worth has fallen 29% this year to $306.6 billion as of Tuesday’s close, hurt by a sharp decline in Tesla’s shares, which have lost all their gains since Donald Trump won November’s presidential election.
Musk, 53, is heading up Trump’s government cost-cutting programme even as he leads Tesla, SpaceX and his other companies.
The stock options package has plunged and soared with the company’s fortunes, valued at about $56 billion at McCormick’s first ruling and $101.5 billion at her second.
In the December ruling, McCormick stood by her January 2024 decision even though Tesla shareholders voted at the company’s annual meeting in June to support the stock options award — seven years after Musk’s compensation plan drew the minority shareholder suit that ignited the legal saga.
“There were undoubtedly a range of healthy amounts that the board could have decided to pay Musk,” McCormick wrote in a 101-page decision. “Instead, the board capitulated to Musk’s terms.”
Tesla’s lawyers said in their brief on Tuesday that McCormick’s decision has in fact hurt shareholders, since “they have lost their say in compensating the company’s once-in-a-generation CEO” and “lost certainty in the company they own”.