Lawyers for Elon Musk and Tesla’s corporate executives are asking a Delaware judge to throw out her ruling requiring the company to rescind a massive and unprecedented pay package for Musk.
Friday’s hearing follows a January ruling in which Chancellor Kathaleen St. Jude McCormick concluded that Musk engineered the landmark 2018 pay package in sham negotiations with non-independent directors. The compensation package originally carried a potential maximum value of about $56 billion, an amount that has fluctuated over the years, but is now estimated to be more than $60 billion.
Following the court’s ruling, Tesla shareholders met in June and ratified Musk’s 2018 pay package for a second time, again by an overwhelming margin.
Defense lawyers say the vote makes it clear that Tesla shareholders, with full knowledge of the flaws in the 2018 process that McCormick pointed out in her January decision, are convinced that Musk is entitled to the package of wages.
“Honoring the shoulder vote would affirm the power of our corporate system,” McCormick told David Ross, an attorney for Musk and the other individual defendants. “That’s how shareholder democracy worked.”
Ross told the judge that the defendants were not challenging the factual findings or legal conclusions in her decision, but were simply asking her to vacate her order directing Tesla to rescind the pay package.
McCormick, however, seemed skeptical of the defense’s arguments, peppering the attorneys with questions and noting that there is no precedent in Delaware law for allowing a post-trial shareholder vote to ratify adjudged breaches of fiduciary duty by directors. of corporations.
“This has never been done before,” she said.
Defense attorneys argued that while they could find no case that was exactly comparable, Delaware law has long recognized shareholder ratification as a cure for corporate governance errors and has long recognized the “sovereignty” of shareholders as owners. final of a corporation.
“I honestly don’t see how Delaware law can tell the owners of the company that they don’t have the right to make the decision they made,” said Rudolf Koch, a lawyer for Tesla.
Donald Verrilli, an attorney for an individual shareholder who owns more than 19,000 Tesla shares, suggested it would be wrong for the single shareholder who filed the lawsuit to thwart the will of the majority of Tesla shareholders. At the time the lawsuit was filed, the plaintiff owned only nine shares of Tesla stock.
“The voice of the majority of shareholders should matter… This lawsuit does not represent the interests of shareholders,” Verrilli said.
Thomas Grady, an attorney for a group of Florida opponents who own or manage nearly 8 million Tesla shares worth about $2 billion, argued that for McCormick to rule on the plaintiff, she would have to “disenfranchise” all shareholders. others of Tesla.
Greg Varallo, an attorney for the plaintiffs, urged McCormick not to give any credence to the June shareholder vote, saying there is no legal precedent in Delaware or anywhere else. There is also no reason for the court to reopen the trial record and admit new evidence, he said.
Under Delaware law, shareholders have no authority to overrule the courts by trying to use a post-trial ratification vote as a “giant rubber band,” Varallo argued.
“Ratification is not magic, and never has been,” Varallo added. “This has to end here and now.”
McCormick gave no indication of when he would rule. It also has yet to rule on a large and unprecedented fee request from the plaintiffs’ lawyers, who claim they are entitled to legal fees in the form of more than $7 billion worth of Tesla stock.
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Image Source : nypost.com
