Tesla is embroiled in a legal battle over a proposed $5.2 billion award for lawyers who successfully challenged Elon Musk’s pay package. The electric carmaker argues that the amount is grossly excessive and that the lawyers deserve only $13.6 million.
In January, a Delaware court voided a proposed $56 billion pay package for Musk, stating that it was improperly approved by Tesla’s board and disadvantaged shareholders. Following the ruling, lead lawyer Greg Varallo requested an award of roughly 29 million shares in Tesla stock, arguing that it was in line with precedents guiding lawyers’ fees in such cases.
Tesla countered by claiming that the benefits from the original ruling were “therapeutic or unquantifiable” and that the requested award was unprecedented and unjustifiable. The company’s lawyers argued that the case did not require the extraordinary efforts that would justify such a high fee.
The legal battle is part of Tesla’s broader campaign to overturn the judge’s decision. The company is set to hold two votes at its annual meeting next week, one to restore the $56 billion award and another to move its domicile from Delaware to Texas.
The outcome of the vote is uncertain, and Musk’s future at Tesla may be at stake. If he loses, his ownership stake in the company will decrease significantly. Proxy advisers have urged investors to vote against the excessive pay award, adding to the challenges facing Tesla in the upcoming shareholder meeting.
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