Lawyers representing a Tesla shareholder have successfully argued in a Delaware court that Elon Musk should not receive a $55-billion compensation package for his work at the electric vehicle company. Instead, they contend that a portion of this package should be allocated towards attorney fees. The attorneys from three law firms made their case to a Delaware judge, stating that their litigation work should be compensated at approximately 11% of the pay package, which equates to around $5.96 billion worth of Tesla shares based on the current stock price.
Chancellor Kathleen McCormick of the Delaware Chancery Court now holds the responsibility of determining the amount of the compensation package that can be designated for attorneys' fees. While Tesla and Musk have the option to appeal the decision to void the CEO's stock options, the plaintiff attorneys are seeking a significant portion of the compensation package.
Typically, plaintiff attorneys receive one-third of a verdict or settlement amount. However, in this case, the attorneys are not requesting the full 33% outlined in Delaware law. They emphasized in their filing that their work over the span of six years, along with substantial out-of-pocket expenses, warranted the requested compensation.
In response to the attorneys' demand, Musk expressed his discontent, labeling the request as 'criminal.' The legal battle originated in 2018 when a former heavy metal drummer and Tesla shareholder, Richard Tornetta, filed a lawsuit against the EV company. Tornetta alleged that Musk had exploited his close connections with the company's board members to secure an exorbitant pay package, leading to a breach of fiduciary duties towards shareholders.
In January, Chancellor McCormick sided with Tornetta and invalidated Musk's pay package, prompting a strong reaction from the Tesla CEO. Tornetta's legal team, led by attorney Greg Varallo, defended their request for compensation, acknowledging that the amount sought was unprecedented but justified by the substantial benefit they had secured for Tesla.
Both Musk and Varallo have yet to comment on the matter following the recent developments. The ongoing dispute underscores the complex legal and financial implications surrounding executive compensation and shareholder rights in corporate governance.
