Delaware Judge Kathleen St J McCormick now faces a huge decision. She has to judge whether the legal team representing the case to void Tesla Tycoon’s massive salary warrants the large legal fee settlement. If she grants the legal fees requested to the lawyers, it would be a “breaking record.”
Lawyers Don’t Agree to Musk’s Eye-Watering Pay
Four lawyers from different law firms protested the high salary fee for Elon Musk as per the approval in 2018. The lawyers voiced their side, stating that the CEO was being paid too much.
Tesla Shareholders Want To Ratify Musk’s Pay
The shareholders of Tesla want Judge Kathleen St. J McCormick to change her ruling by “amending” her previous judgment. Shareholders want Musk’s pay package at the high rate they’ve argued for, but the court denied it.
What Happned in 2018?
Reports from Reuters shared that the Tesla shareholders agreed to the $56 billion remuneration package for Musk. But, this pay package is not the first time the CEO’s payment was set that high. In 2018, approval was confirmed for the CEO’s first payment plan.
Increased Sales After Approved Remuneration
When Musk’s first remuneration package was approved, delivery and sales of Tesla electric vehicles rose steadily. Some investors had also reportedly said that they believe the approved remuneration lowers the risk of Musk parting ways with the company.
Profits Amassed
Reuters reported the profit goals of Tesla EV manufacturers were set at $175 billion for four fiscal quarters. However, after the adjustments to profit expectations to $14 billion, the target was met in 2022 and 2023.
Overwhelmingly High Percentages
The votes that came in from the company’s shareholders for Judge McCormick to reconsider and approve the pay package for the CEO, Musk, were very high. The reported votes stood at around 70% saying “yes” to the $56 billion payment plan for the CEO.
How the Pay Plan “Supposed” to Be
The remuneration plan was supposed to allow Musk the liberty of purchasing stocks of over $300 million, valued at almost $56 billion. With that, the stock value reportedly increased even more.
Revised According to Shareholders
Tesla shareholders have stated that they revised the plan and feel it is now ready for the judge to revisit and approve.
Not Everyone Agrees
Not everyone agrees with Musk’s steep pay package. While many shareholders agreed to Musk’s remuneration, there were conflicted opinions.
The Verdict for Now
According to Bloomberg, Judge McCormick voided the request to have the CEO remuneration set at $56 billion. She said that among the shareholders and the board members of the EV manufacturer were “conflicts of interest,” which may have “taintd” the final decision.
The Lawyers
The lawyers who were against the proposed remuneration package for the CEO said they wanted $29 million in Tesla stock. If the lawyers are going to be paid, historically, it would be the highest legal fees ever paid to a legal team, Bloomberg reported.
“A Tale for Another Time”
Judge McCormick has commented that she would consider the vote presented as a separate hearing regarding the request of “re-ratifying” her former decision.
Drop and Rise in Stocks
Tesla has reported that stocks have decreased since the start of the year. However, the EV manufacturer said there was a change. With the value increasing and a better outlook for the future, it should do well. At the same time, they also consider the positive change should keep Musk at the top as “one of the richest in the world.”
Shareholders are Benefiting
Robert Jackson, a university law professor who had testified in the case opposing the CEO’s pay set up, voiced his comment. He said the voiding of Musk’s pay plan had helped Tesla shareholders. If Musk were allowed to win, he and the company would’ve had an “unfair advantage.”
A Lawyer Comments
One of the lawyers on the opposing side also highlighted that Tesla’s shareholders benefited from taking stock instead of cash. He said that this would eliminate them having to touch the company’s finances.
Nothing for the Company
A University of Chicago law professor, Daniel Fuschel, who testified on behalf of Musk, said that the company had gained nothing from the judge’s decision to deny the payment approval.
Let the Ruling Stand
The leading legal advisor, Greg Varallo, for the team that opposed Musk’s salary plan, commented that the judge “shouldn’t be swayed” by “Musk’s clown show.” His comment came after her ruling.
No Intimidation
According to reports, Varallo also told the judge that in Delaware, they “didn’t ‘do law’ based on whether a company’s CEO is unhappy.”
Largest Legal Fees in Delaware
The plaintiff’s lawyers said they would accept $1.4 billion in cash. Allegedly, this would be the largest legal fee payout in Delaware County’s history.
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