Tesla has been mired in a legal battle to restore CEO Elon Musk's $56 billion pay package after a judge ruled that shareholders approved his compensation in 2018 without key information or sufficient independence. However, a resolution appears to be around the corner.
Reuters reported that Tesla has petitioned the Delaware Supreme Court to approve Musk's payday after the company's shareholders affirmed it in a vote last year, a move that a lower court later rejected as invalid.
Musk is the richest person in the world, according to Forbes. Despite Tesla's disappointing year, which has been marked by lagging sales and fluctuating stocks, Musk's wealth is expected to grow. The company's board of directors recently drafted a new $1 trillion pay proposal.
The case is seen as a bellwether of what's to come — and could have a significant impact not only on the future of corporate law but also on the fortunes of the First State.
Corporations once viewed Delaware as a favorable location because of its business-friendly legal framework, as the Fordham Journal of Corporate and Financial Law explained. However, Tesla's fight to restore Musk's pay package has fueled allegations that the state has become hostile toward entrepreneurs, and companies have begun to do business elsewhere. For its part, Tesla moved its incorporation to Texas last year.
Since Texas has some of the lowest tax burdens in the United States, the move could benefit consumers. If increased profitability helps to bring down electric vehicle prices, more zero-tailpipe-emissions vehicles could end up on roads, leading to healthier air. EVs also save drivers significant money on energy and maintenance costs.
As for the push to restore Musk's payday, Tesla attorney Jeffrey Wall argued that the package's approval was part of the "most informed stockholder vote in Delaware history," per Reuters.
"Reaffirming that would resolve this case," he added. "... Shareholders in 2024 knew exactly what they were voting for."
On the other hand, attorney Greg Varallo, who represents Richard Tornetta — an investor who had nine shares of Tesla stock when he initiated the case in 2018 — argued that the Supreme Court should accept the lower court's ruling because it adhered to established laws and facts.
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Tesla 🚙 "There is nothing extraordinary about this trial opinion," he said, per Reuters. "What makes it truly extraordinary is that it addresses the largest pay package in human history, awarded to the richest man on Earth, who is also one of the most powerful men on Earth."
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The justices will also examine a $345 million legal fee that Chancellor McCormick ordered Tesla to pay to Tornetta's attorneys. The decision is expected to take months.
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