A law firm representing Elon Musk and Tesla has helped draft legislation that could potentially restore the billionaire CEO’s massive compensation package, which was blocked last year due to his classification as a “controller” of the company. The proposed state legislation would amend Delaware’s corporate law to ease the rules determining whether a shareholder is deemed a “controller.”
Under existing law, shareholders below the one-third threshold still receive the “controller” classification if they exert other avenues of control. In contrast, the proposed law would set a requirement that a shareholder hold at least a third of a company’s shares in order to be deemed a “controller.” This change could impact Musk’s Tesla compensation package, which is currently on appeal to the state’s Supreme Court.
Legal experts are divided on whether the proposed legislation, if enacted, could revive Musk’s pay package. Some argue that it would not affect his case, while others believe it could allow the Delaware court to reverse its decision and grant Musk the pay package. The bill lacks an explicit mention forbidding its application to pending cases, which has raised concerns among legal experts.
The law firm representing Musk and Tesla claimed that their involvement in drafting the legislation was not on behalf of or otherwise influenced by any firm client, but rather as part of a group of lawyers, professors, and experts shaping Delaware’s business statutes. However, some experts say that this lack of clarity could lead to unintended consequences.
Musk lost his compensation package after being recognized as a “controller” despite holding less than a third of Tesla’s shares. The proposed changes to the law could ease scrutiny applied to Musk, resulting in a reversal of the court’s judgment. If enacted, the legislation could potentially restore the $55.8 billion pay package currently on appeal.
The bill’s sponsor, Delaware Democratic state Sen. Bryan Townsend, claimed that the bill is “not retroactive and would not affect the litigation regarding Elon Musk’s compensation package at Tesla.” However, some experts disagree, saying that the lack of clarity in the legislation could allow for a court finding that alters the outcome of Musk’s case.
The proposed law has sparked debate among legal experts, with some arguing that it could revive Musk’s pay package and others believing that its impact is uncertain. The outcome will depend on how the Delaware Supreme Court interprets the legislation and its application to pending cases.
Source: https://abcnews.go.com/Business/teslas-law-firm-helps-draft-legislation-experts-restore/story?id=118977085