A prominent corporate governance professor has accused Tesla of threatening to dismiss one of its law firms due to disagreements over Elon Musk’s substantial $56 billion compensation request.
In a legal document filed on Monday, Charles Elson, a former University of Delaware professor, stated that his law firm, Holland & Knight, where he has been employed for nearly three decades, will sever ties with the firm unless Tesla resigns. Elson claimed he made the threat to terminate the relationship. He intends to submit legal arguments in a shareholder lawsuit contesting the contentious largest dividend in U.S. history.
Elson asserted in the filing that Tesla’s actions to block his opinion from being included in lawsuits citing conflict of interest accusations were “strange and outrageous” and that “Mr. Musk was directing Tesla.” “It’s akin to attempting to intimidate the law with a fig leaf.” The professor was apprehended for issuing a serious financial ultimatum to a law firm that had a consulting connection with him.
“This isn’t the first occasion Tesla has threatened to dismiss a law firm for hiring someone who has disrupted Elon Musk’s performance,” Elson added. He mentioned resigning from the company upon discovery of Tesla’s threats “to shield the firm from reprisal while upholding critical principles of academic freedom.”
Holland & Knight refutes being coerced by Tesla, stating, “We concluded that the proposed course of action by Mr. Charles Elson was contradictory to our responsibilities to our clients.” It denied the allegations.
The legal dispute is the latest setback to Tesla and Musk’s endeavors to push forward a multibillion-dollar compensation plan sanctioned by Tesla’s board of directors, with a Delaware judge ruling it prejudicial to shareholders. “It’s an astronomical sum of money.”
Last month, Delaware Chancellor Katherine McCormick remarked that some Tesla directors “lacked independence” from Mr. Musk, shareholders were “insufficiently informed,” and approval of the plan would be “unfair.” It was disclosed that the remuneration amount tied to the plan was excessive. “Unreasonable pricing.”
Tesla subsequently declared its intent to hold a fresh shareholder vote to reinstate Musk’s compensation, which Elson argues is impermissible under Delaware law. His proposal to present a second viewpoint to the court triggered a Tesla threat to cut ties with the company, as alleged in court filings.
Elson contended that the conflict of interest assertion was unfounded as he was a consultant to Holland & Knight, not an attorney, and was acting as an amicus curiae.
Musk continues to demand a $56 billion payout from Tesla, amidst the EV manufacturer grappling with sales upkeep. While Tesla set a new track record by dispatching over 1.8 million vehicles globally in 2023, it faces heightened rivalry from other automakers and a dwindling demand for fully electric vehicles. The company revealed delivering 386,810 vehicles in the initial three months of 2024, almost 9% below sales during the corresponding period last year.
To circumvent the Delaware ruling, Mr. Musk threatened to relocate Tesla’s public listing to Texas, where the firm is presently situated, and warned of relocating manufacturing operations outside Tesla unless a new compensation package is devised.
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Dan Ives, an analyst at Wedbush Securities, labeled the threat as “the elephant in the room” and a “significant shadow” over Tesla’s stock price, which has declined by approximately one-third this year.
Tesla Chairman Robin Denholm indicated in a letter to shareholders last month that Musk had achieved growth and met stock price and operational objectives outlined in a 2018 remuneration package agreement endorsed by Tesla shareholders.
Denholm remarked that the Delaware court had “reversed its decision” and emphasized that Musk has not received any compensation for his services at Tesla in the past six years.
“We believe this is fundamentally unjust to us and to the numerous shareholders who have already assented, and contrary to the desires of the shareholders who voted in favor of it,” she added.
Source: www.theguardian.com
