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The judge who threw out Tesla Inc. co-founder Elon Musk’s record-setting US$55.8-billion pay package said she’s received “many communications” from investors about the request from the winning lawyers for almost US$6 billion in company stock.
Delaware Chancery Court chief judge Kathaleen McCormick said she’s not reading the letters. The state judiciary’s ethics code “prohibits me from considering” the letters from non-parties in the litigation “who claim to hold stock in Tesla,” she wrote to lawyers on both sides. She asked the attorneys to recommend a process for handling the letters.
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In January, McCormick concluded that the compensation plan — the largest ever given to a corporate executive in the United States — was excessive and that Tesla’s directors were handcuffed by conflicts of interest when they approved it in 2018. The judge also faulted Tesla’s public disclosure about the pay package.
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This month, lawyers representing the investor who challenged the pay package, Richard Tornetta, submitted an unusual request to be paid their fees in stock, which they said would ease the burden on company shareholders.
That didn’t go over well with some investors, who launched a letter-writing campaign.
Shareholder Alexandra Merz urged fellow investors in a post on social-media platform X to “send tens of thousands of letters” to McCormick and “describe in your own passionate words in a VERY RESPECTFUL MANNER” how there is no financial benefit from the judge’s ruling striking down the pay package that “could serve as the basis of calculation for plaintiff attorney fees.”
Another X post reads: “Elon Musk deserves the original compensation package in full,” it said. “On top of that, I was surprised to learn that the lawyers who filed and ‘won’ this class action lawsuit demanded a roughly $5.9 billion compensation in Tesla shares, claiming it was to protect Tesla shareholders. Nothing could be further from the truth.”
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Arthur Blake, a Tesla investor, told McCormick in a letter posted to the internet that her ruling and the requested legal fees were “extremely contrary” to shareholders’ interests.
“Respectfully, I believe that this judgment is dangerous and misguided, extremely shareholder-hostile and sets a new precedent that will now mark Delaware going forward as being the state with the most business unfriendly environment,” Blake said.
Musk has encouraged other businesses to follow his lead and move to reincorporate outside Delaware, the corporate home to almost 70 per cent of Fortune 500 companies.
Greg Varallo, a lawyer for Tornetta, declined to comment. Evan Chesler, one of Musk’s attorneys, didn’t immediately respond after regular business hours to an email seeking comment.
The case is Tornetta v. Musk, 2018-0408, Delaware Chancery Court (Wilmington).
Bloomberg.com
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