Elon Musk made his promise to appeal against a controversial decision of a Delaware judge who has wiped out his performance-based compensation plan of $ 56 billion because the CEO of Tesla (TSLA) leads an uprising that cruy the politics of that state.
The billionaire Solaatie with the current and former Tesla directors introduced Tuesday to the High -Teraware of Delaware that a refusal by the judge Kathalen McCormick of Delaware Chanancery Court to restore Musk’s wage, despite approvals of Tesla shareholders who should lead several errors.
“Yes, Tesla has a chance” to succeed with his new attraction, said Tulane University Law Professor Ann Lipton. But “the situation is complicated by the fact that the entire decision has become a political football.”
McCormick initially made the wage pact invalid in January 2024 and did this for the second time last December – based on the claims of a single shareholder who claimed in an alleged Class Action right that Musk’s influence on Tesla made him a de facto controller from Tesla.
McCormick concluded that “extensive ties” between Musk and the people who negotiate the wage package and a lack of public disclosure about the relationships of Musk with those who have approved the deal made it invalid among Delaware’s business laws.
Elon Musk and President Trump in a Tesla in the White House on Tuesday. (Pool Vía AP) ·Associated Press
Musk responded by promising to get the recordings of his many companies, including Tesla, from Delaware.
These so -called “Dexits” were followed by decisions from managers at other companies to be re -admitted elsewhere, including Bill Ackman’s Hedgefonds Pershing Square Capital Management, because some people broadcast their frustrations with the powerful Channyy Court of Delaware.
The recent high -profile rooms venture a state that was the dominant place about the past century to take up because of the so -called commercial laws, specialized business courts and the convenience of documents for submitting company.
The newly chosen governor of the State, Matt Meyer, launched a working group to study assembly complaints and legislators try to convince a bill that would limit the lawsuits of investors by allowing company councils to control their directors, officers and shareholders of liability.
The measure is not retroactive and therefore would not leave Musk or other parties from past provisions.
Semafor reported last week that the legislation was prompted by warnings from important business lawyers that large companies, including Walmart (WMT), could leave the state.
The political drama in Delaware could play a role in what the highest court of the state decides to do about the wage of Musk.
Lipton, the Tulane professor, mentioned the many complications: “Musk attacking the courts in Delaware, his allies threaten to leave the State and about to assume a new statute that reads as a direct reproduction of the Delaware courts.”
“It is not clear to me whether that will probably influence the Delaware Supreme Court – in both directions,” she added.
What Musk and the Tesla directors on their appeal Argeelen is that the lower court has applied the wrong, increased legal test to evaluate actions that are undertaken by Tesla’s administration around the compensation plan.
They said that McCormick wrongly subjected the actions of the board to the standard “very fairness” standard and then applied it incorrectly. This standard is applied to protect shareholders when a controlling shareholder negotiates a self-interested deal with the board.
The status of Musk as a limited minority shareholder at the time of the negotiations, they said, should not have led to his designation as a controlling shareholder.
The bank’s bank can be seen in a courtroom at the Delaware Supreme Court. Reuters/Andrew Kelly ·Reuters / Reuters
Professor Marcel Kahan of the New York University School of Law said that the Supreme Court will decide which specific issues he should tackle in the case and he suspects that she wants to clarify the definition for ‘controlling shareholder’.
That issue is now the subject of the controversial proposed legislation in Delaware to change the company law of the State. The proposed changes would exempt shareholders by less than 33.3% ownership.
“My gamble is that the court wants to place his five cents on ‘controller creep’,” said Kahan, referring to the extension of the court who can subject a shareholder to the status “controller”.
“I would not be surprised at all if the court comes to a different finding about whether Musk is a controlling shareholder than the chancellery,” Kahan added.
Musk and the Tesla directors also claim that McCormick’s invalidity of a second Tesla shareholders voice about the compensation of Musk was another error because the vote demonstrated that the shareholders of the electric vehicle company “rejected” her initial finding was paid too much.
The fact that Tesla’s shareholders have since received a return of more than $ 700 billion on their investment in Musk, they said, shows that the compensation plan had an illustrated coordination between the interests of executive and shareholders.
With the decision of McCormick, shareholders “lost their say in compensating the once-in-one-generation CEO of the company” and “lost certainty in the company they possess.”
Delaware Chancellor Kathalen St. Jude McCormick, the judge who invalidated Elon Musk’s wages. (Eric Crossan via AP) ·Associated Press
“The Bottom line of the decisions of the Court of Chance is that a compensation plan that results in spectacular growth must be withdrawn because it was somehow unfair towards the shareholders who benefited from that growth and overwhelmed the plan – twice.”
For Musk to retain his $ 56 billion, Kahan said of New York University, the court should reverse both McCormick’s finding that Musk checked the shareholder when he negotiated his payment agreement with the board of Tesla, and her finding that the board could not ‘clean’ – take the wrong transaction.
As for cleaning, he said: “I see the court say:” You were a bit too heavy here. “Cleaning only shifts the burden to prove whether $ 56 billion was fair from defendants to the claimants.
“If $ 56 billion is too high, it does not follow that zero is the correct amount, anyway? Zero can be too low.”
In that case, the court could send the case back to the lower court and instructing to choose a number of fair compensation.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on X @alexisweed.
Click here for an in -depth analysis of the latest stock market news and events that move the stock prices
Read Yahoo Finance’s latest financial and business news
