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One of the last chapters in Elon Musk\u2019s six-year legal fight to save his $56 billion Tesla<\/a> Inc. pay package unfolded Friday, as the world\u2019s richest man made his final pitch to a judge that ruled the compensation deal was flawed and threw it out.<\/p>\n Delaware Chancery Court Judge\u00a0Kathaleen St. J. McCormick<\/a>\u00a0heard arguments on whether a June 13 vote by shareholders to revive the compensation plan for Tesla\u2019s co-founder justifies changing\u00a0her ruling<\/a>. Earlier this year, she found the largest executive-pay package in history was fouled by conflicts of interest and improper disclosures.\u00a0<\/p>\n \u201cWe\u2019re asking you to give effect to the vote,\u201d Tesla lawyer David Ross said during the hearing. Just because the board used a flawed process for setting Musk\u2019s pay, stakeholders \u201cshouldn\u2019t be foreclosed\u201d from deciding to ratify the compensation package, he said.\u00a0<\/p>\n However, under questioning from McCormick<\/a>, Ross acknowledged an investor vote had never been used to affect a post-trial ruling under Delaware law. The judge has no legal obligation to recognize the vote, but she can consider it. If she sticks with her earlier decision, Musk, Tesla\u2019s chief executive officer, can finally appeal the decision to the Delaware Supreme Court.<\/p>\n \u201cThe real question is whether shareholders can ratify\u201d breaches of legal duties by directors after a judge has called them out after a trial, McCormick said during the hearing, signaling her skepticism of arguments made by Musk and Tesla.\u00a0<\/p>\n Musk\u2019s lawyers argue the proxy vote by Tesla investors addressed concerns raised by the judge, including those about\u00a0company directors<\/a>\u00a0who approved the pay plan being beholden to the billionaire and not looking after shareholders\u2019 interests.\u00a0<\/p>\n Rudolf Koch, a lawyer for Tesla\u2019s board, said if McCormick brushes aside the June proxy vote, she would be at odds with the state\u2019s corporate-law statutes that focus on protecting shareholders. \u201cI don\u2019t see how Delaware law can tell owners of a company that they can\u2019t make\u201d their own decision on how much the CEO should be paid, Koch told the judge.<\/p>\n Attorneys for Richard Tornetta, a Tesla investor who challenged Musk\u2019s pay as a waste of corporate assets, argued the shareholder vote was irrelevant to the case and that the company\u2019s maneuvers to address problems identified by the judge were inadequate.<\/p>\n In legal filings, Tornetta\u2019s lawyers argued the latest proxy vote was tainted by Musk\u2019s threats to walk away from Tesla if his pay plan wasn\u2019t resurrected and take with him some of the company\u2019s Artificial Intelligence assets.\u00a0<\/p>\n During the hearing, Greg Varallo, Tornetta\u2019s lead attorney, said there are serious questions about the the legitimacy of the most recent shareholder vote.<\/p>\n \u201cOur law doesn\u2019t say shareholders can overrule courts,\u201d Varallo said, adding that the defense arguments, while creative, are at odds with existing corporate statutes.\u00a0<\/p>\n McCormick said she\u2019d try to return her decision in the case in \u201ca timely fashion.\u201d The ruling also will include her decision on a request by Tornetta\u2019s lawyers to have their\u00a0legal fees<\/a>\u00a0for winning the case paid with $7 billion in Tesla stock.<\/p>\n McCormick\u2019s courtroom in Wilmington, Delaware, was packed with lawyers, reporters and onlookers for what may be the last hearing in a case that began with Tornetta\u2019s lawsuit in 2018. Neither Musk nor Tornetta were in attendance.\u00a0<\/p>\n The unprecedented court case has drawn world-wide attention. More than 8,000 Tesla shareholders sent letters to McCormick sharing their opinions on her pay ruling. And Musk was so upset by the judge\u2019s decision to block the pay packages that\u00a0he moved<\/a>\u00a0Tesla\u2019s state of incorporation out of Delaware to Texas.<\/p>\n The case is Tornetta v. Musk, 2018-0408, Delaware Chancery Court (Wilmington).<\/p>\n<\/div>\n CEO Daily provides key context for the news leaders need to know from across the world of business. Every weekday morning, more than 125,000 readers trust CEO Daily for insights about\u2013and from inside\u2013the C-suite. Subscribe Now<\/a>.<\/div>\n\nRecommended Newsletter:<\/strong><\/p>\n