Lawyers for Tesla were back in the Delaware Supreme Court on Wednesday amid what NPR called a “yearslong legal drama” over a controversial pay proposal for CEO Elon Musk.
This particular litigation has indeed been dragging on for years; it pertains to a compensation structure proposed by Tesla‘s board in January 2018. According to NPR, the proposal was somewhat open-ended, but the board acknowledged a potential value of $55.8 billion.
The outlet observed that the quantifiable value of Musk’s pay under the 2018 proposal “depends on when and how you count,” citing Tesla‘s volatile share price.
As for “when,” the Bureau of Labor Statistics’ inflation calculator indicated that $55.8 billion in January 2018 would be worth $72.9 billion today. Variables like that might have spurred Tesla investor Richard Tornetta to file suit against the brand, the board, and Musk in 2018.
Tornetta argued that Musk’s proposed pay was a violation of the automaker’s fiduciary duty to investors and maintained that factors like the CEO’s close ties to board members were not meaningfully disclosed to shareholders prior to that initial vote.
Despite a volatile year, Tesla is still a powerhouse among electric vehicle brands. Suits like the one filed in Delaware and the conflict underlying it have the potential to further erode trust in the automaker, which in turn could discourage or diminish electric vehicle adoption.
Tornetta filed his suit with the Delaware Court of Chancery. Entities like Tesla have long favored the state and venue for its corporate-friendly laws and for the court itself, which is devoted solely to business disputes.
In this instance, however, the court sided with the plaintiff and deemed the package an “unfathomable sum.” After Judge Kathaleen McCormick ordered Tesla back to the drawing board, the board instead held a second vote on the exact same package.
In 2024, Tesla investors again voted in favor of Musk’s compensation as proposed, which McCormick “rejected.” Tesla appealed, leading to the current action before the court.
Reuters noted that even if the Chancery Court rules against Tesla’s appeal, Musk stood to “reap tens of billions of dollars” after the board approved a $29 billion replacement pay structure in August.
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A month later, the board upped Musk’s incentives considerably, with a 10-year proposal valued at as much as $1 trillion, and shareholders will again vote on the CEO’s compensation at a yearly meeting scheduled for Nov. 6.
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