Tesla’s unprecedented legal saga continues as Delaware Chancellor Kathaleen McCormick maintains her position against Elon Musk’s $56 billion compensation package, despite strong shareholder support for its reinstatement.
In a decisive move that’s sent shockwaves through corporate America, Chancellor McCormick rejected Tesla’s request to revise her January ruling, even after 72% of shareholders voted to reinstate the compensation plan this June. The judge’s steadfast position highlights a growing tension between shareholder authority and judicial oversight in corporate governance.
McCormick identified four critical issues with Tesla’s defense. The court determined that post-trial evidence couldn’t reverse an adverse decision, and common-law ratification couldn’t be introduced after the post-trial opinion. Additionally, she emphasized that shareholder votes alone cannot validate conflicted-controller transactions.
The compensation package, initially valued at $2.6 billion in 2018, has skyrocketed to an estimated $101.5 billion based on recent market valuations. This astronomical increase underscores the unprecedented scale of both the compensation and the legal battle surrounding it.
Tesla’s response to the ruling raises fundamental questions about corporate governance in Delaware, where many U.S. companies are incorporated. The company argues that this decision effectively transfers control from shareholders to judges and plaintiffs’ lawyers.
The nearly identical shareholder approval rates between 2018 (73%) and 2024 (72%) demonstrate consistent stockholder support for Elon’s compensation package. This consistency adds weight to Tesla’s argument about shareholder rights and corporate autonomy.
Tesla has announced its intention to appeal the ruling to the Delaware Supreme Court. This next phase could set significant precedents for executive compensation and corporate governance across the United States.
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