Wilmington, Delaware – Shareholders who successfully challenged Elon Musk’s $56 billion compensation package from Tesla are now seeking compensation in the form of company shares valued at nearly $6 billion. In a recent filing with the Delaware Court of Chancery, the lead counsel for the shareholders acknowledged that the requested award was unprecedented in its absolute value but emphasized that it was in line with previous awards from Delaware courts.
The request for shares as compensation follows a significant ruling by Judge Kathaleen McCormick, who rescinded the controversial pay package granted to Musk by the Tesla board in 2018. The judge determined that the board’s lack of independence from Musk and the manner in which the shares were awarded were unfair to other shareholders. As a result, the attorneys representing the shareholders are now seeking a portion of the benefits obtained from the cancelled award.
Unlike typical civil cases where lawyers work on a contingency basis, the complexity of the Musk pay case, which involved no cash exchange, presents unique challenges for determining appropriate compensation. The attorneys are seeking a fee that reflects a percentage of the benefits gained for the shareholders, based on past legal precedents in Delaware.
In their filing, the attorneys proposed receiving shares that would amount to 11% of the total recovery, a figure lower than the 15% awarded in a previous Delaware case. This would translate to approximately 29 million Tesla shares valued at $5.9 billion based on the company’s closing stock price. If approved by the court, the law firm representing the shareholders would become one of the top 10 largest shareholders in the company.
Despite the request for shares as compensation, Elon Musk has the right to challenge the fee proposal and is expected to appeal the nullification of his pay package. The attorneys representing him have not yet provided a response to the recent filing, and the lead attorney from the law firm handling the case declined to comment further.
Following the legal developments, Musk expressed dissatisfaction with the Delaware court system and recommended that companies consider relocating to Nevada or Texas. In response, he has already transferred the incorporation of two of his companies to those states. The law firm handling the case noted that larger jury awards in civil lawsuits have been granted in Texas, emphasizing the ongoing legal complexities surrounding the Tesla compensation dispute.