Overcompensated? Lawyers Suing to Stop Musk’s Tesla Pay Package Sought Massive Windfall

Attorneys suing to prevent Elon Musk from receiving a $56 billion pay package approved by Tesla shareholders have been awarded $345 million in legal fees by a Delaware business court.

While still an impressive amount of money, it’s a tiny fraction of the $5.6 billion in Tesla shares or $1 billion in cash that was being sought as compensation for the legal team’s efforts.

Tesla shareholders in 2018 created a performance-based CEO pay package which included no salary or bonus but instead awarded valuable stock options for hitting performance targets. At that time, Tesla was valued at roughly $60 billion.

In 2020, Tesla’s market value ballooned to more than $650 billion, hitting the valuation target that some had called “impossible” and bringing Musk’s compensation to $56 billion in stock options.

Tesla shareholder Richard Tornetta’s legal team sued to challenge the agreement and has been working on the case for the past 6 years.

In 2024, a Delaware court twice rejected the compensation plan even though shareholders overwhelmingly backed the plan and supported reinstating it.

Key points on Tesla/Musk compensation case:

2018: Tesla ( $TSLA ) worth $60B, created performance-based CEO package
– $0 base pay
– $55B potential if company 10x’d to $650B
– Media called targets “impossible”

2020: Tesla hit $650B valuation target

2024: Delaware court voids… pic.twitter.com/hcTwTZEzh6

— BitLogicX (@bytecoderman) December 3, 2024

According to Bloomberg Law, after the latest ruling, the company’s board says it will appeal the decision to the Delaware Supreme Court which must hear the appeals of lower-court decisions.

Tornetta’s legal team, which has worked without pay since 2018, had asked the court to approve what they called a “conservative” fee of 11% of the stock Musk would have received.

Fox Business reports that this would have amounted to 29 million shares of the company, valued at nearly $6 billion, amounting to more than $280,000 for each of the 19,500 hours worked on the case by each attorney, associate and paralegal at the firm.

To put that compensation into perspective, the highest paid corporate attorneys who bill by the hour and who are paid regardless of the outcome, typically make upwards of $2,500 an hour.

John Reed, who is an attorney for Tesla, said, “You asked if Elon Musk was overpaid. We want to ask if the plaintiff’s lawyers are being overpaid.”

Referring to the $345 million in legal fees awarded to the plaintiff’s attorneys as a “windfall” fails to convey the kind of lawfare being used to steal hundreds of millions of dollars from a CEO who delivered what he promised to shareholders and then redistributing that plundered money to crooked lawyers.