Lawyers who got Elon Musk’s $56 billion pay struck down, seek about $6 billion in Tesla stock
Musk’s executive compensation award – the largest ever given to a corporate titan – filed the request Friday in Delaware state court. The attorneys for shareholder Richard Tornetta argued in a court filing they deserve more than 29 million Tesla shares. They explained why they prefer stock to cash.
“We are prepared to ‘eat our cooking,’" according to the filing. “This structure has the benefit of linking the award directly to the benefit created and avoids taking even one cent from the Tesla balance sheet to pay fees. It is also tax-deductible by Tesla." Austin-based Tesla, with a $645 billion valuation, is among the largest companies in the world by market cap.
Ann Lipton, a corporate law professor at Tulane University, said it’s the largest attorney fee request she’s ever heard of. “Now, to be fair, the case involved the largest compensation award ever to an executive," she said. Lipton had her own theory for why the lawyers prefer stock.
“I assume the plaintiffs’ attorneys figured if they sought $6 billion in cash in fees it could cripple Tesla," she said. “Since the case involved a stock award to Musk, they thought it would be appropriate to ask for the fee in shares so it wouldn’t be as rough for Tesla shareholders. That makes a lot of sense to me." Because Tornetta brought the case on behalf of shareholders, about 267 million shares that were promised to Musk in his pay plan will be returned to Tesla as a result of the investor’s victory, according to the filing.
The filing is the latest step toward finalizing Delaware Chancery Court Chief Judge Kathaleen St. J. McCormick’s conclusion that Tesla directors gave Musk the excessive compensation plan because they were handcuffed by conflicts of interest.
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