Tesla’s battle to restore Elon Musk’s $45bn (£35bn) pay packet is far from over, according to legal experts, despite shareholders backing the CEO’s pay deal.
Investors in the electric car maker re-ratified a pay deal on Thursday after it was struck down by a judge in the US state of Delaware. The company’s chairman, Robin Deynholm, has already pledged to “take it back to court”.
However, doubts remain as to whether Musk will have access to the share-based package.
Richard Tornetta, a lawyer representing Tesla shareholders who filed the lawsuit that led to the cancellation of Musk’s pay package, said in a statement Thursday that the vote was “deeply flawed.”
“We believe that the ratification vote that Elon sought and forced is deeply flawed as a matter of law, legally ineffective and has no bearing on our case. We will respond to any arguments raised in a timely manner,” said Greg Varallo, a partner at the law firm of Bernstein, Litowitz, Berger & Grossmann.
Judge Kathaleen McCormick threw out Musk’s pay package in January, ruling that board members were not sufficiently independent of Tesla’s CEO in negotiating the package.
Ann Lipton, a professor at Tulane Law School, said the Tesla vote was “unprecedented” and litigation surrounding the deal will continue in Delaware, where Tesla was incorporated when the original wage deal was agreed in 2018.
“It is not clear from a legal point of view what effect this has [of the vote] it will,” Lipton said. “Assuming no settlement is reached, the litigation will continue before Chancellor McCormick.” Tesla will argue that the new vote cures any flaws in the original valuation, which is why Musk’s salary is restored; prosecutors will argue not.’
Any decision by McCormick will likely be appealed by the losing party to the Delaware Supreme Court, Lipton said. “At that point, the Delaware Supreme Court will have two issues before it: Was McCormick right to strike the deck in the first place?” And if so, will the new vote restore the deck?’
Eric Talley, a professor at Columbia Law School, said Musk’s comments ahead of Thursday’s vote could be seen as pressure on shareholders, pointing out that Musk threatened in January to build AI and robotics products outside the company if he didn’t get enough. vote control.
“To the extent that Tesla uses this vote as a reason to overturn the chancellor’s decision, I would expect a big argument,” Talley said. “In particular, there is a credible argument that today’s vote was the result of coercion … and is therefore not valid.”
The Delaware court will likely require Tesla to show that the latest process was conducted independently of Musk and that the vote was “procedurally fair,” said Brian Quinn, a professor at Boston College Law School.
“This is an unprecedented situation, so it’s important to remember that all pleading burdens are on the board … it’s not done yet,” he said.
Speaking to shareholders after winning the vote, Musk said: “I want to start by saying, damn, I love you guys!
Thursday’s Tesla shareholder meeting also voted to move Tesla from Delaware to Texas, where the company is headquartered. However, litigation related to the pay package will remain in Delaware, according to McCormick, who wrote last month that she does not expect Tesla “to litigate this action anywhere but Delaware.”
But the new pay packages for Musk will fall under the law of the company’s new home, Talley said. “Now that Tesla is re-incorporating in Texas, further decisions would fall under Texas law,” he said.