It is a protected wager that Elon Musk will always remember the identify Kathaleen McCormick. The vice chancellor of the Delaware Court docket of Chancery simply handed him his second defeat, following the earlier mandate to honor his $44 billion acquisition of Twitter in October 2022.
McCormick now guidelines that Musk’s record-breaking $55.8 billion pay bundle from 2018 is null and void, greater than a yr after the tip of the trial. The inventory choices he acquired should be renegotiated in a clear method to make sure equity for shareholders.
“By no means incorporate in Delaware,” Musk posted Tuesday on his social media web site X, previously Twitter, earlier than including that he really helpful Nevada or Texas “when you favor shareholders determine issues.”
By no means incorporate what you are promoting within the state of Delaware
— Elon Musk (@elonmusk) January 30, 2024
Him then place the problem in a user study asking if Tesla ought to transfer its state of incorporation to Texas, according to the place its headquarters are situated.
On the time of writing, greater than 750,000 accounts have voted, with 88% supporting the concept.
If Musk follows by way of, it would not be the primary time he has taken such a measure.
After forcing Musk to meet his dedication to purchase Twitter, McCormick based the social media web site’s mum or dad firm in Nevada.
Tesla itself is headquartered in Texas solely as a result of he moved it from California after repeated clashes with well being officers who stopped him from forcing retailer employees to construct automobiles through the 2020 pandemic lockdowns.
What are the enterprise advantages for Musk in Texas?
Musk has intensive ties to the state, courting again to the operation of SpaceX’s Boca Chica launch web site, known as Starbase.
However the authorities can also be pleasant to the tycoon.
Lawyer Basic Ken Paxton, just lately impeached on corruption fees however acquitted by the state legislature, has already gone after Musk’s declared enemies.
Musk, in flip, has publicly supported Texas in its standoff with the federal authorities over immigration.
Whereas the Delaware Chancery Court docket has a repute for rigorously implementing company legislation, it could be untimely for Musk to seek out fault just because McCormick put aside his 2018 pay bundle.
His authorized workforce did not defend the negotiation course of in courtroom, regardless of intensive testimony and greater than 1,700 items of proof entered into proof.
Furthermore, Musk didn’t point out such considerations about Delaware company legislation or the chancery when it dominated in his favor within the case of his acquisition of SolarCity, which was challenged by Tesla shareholders.
Texel is completely proper.
This authorities is intentionally breaking the legislation by supporting unlawful immigration on an unprecedented scale!
— Elon Musk (@elonmusk) January 25, 2024
Why Delaware has spoken out towards the Musk and Tesla board
McCormick’s 200-page opinion on Tuesday gives a damning indictment of Tesla’s board.
It described seven of the eight executives who fell in line with Musk and had been all too prepared to go together with no matter needs he demanded – both due to long-standing private ties or the “life-changing” wealth they amassed working for him to allow.
That assumes they had been even consulted on main selections earlier than the CEO made them unilaterally.
Even Musk’s personal testimony included the remark that it was me negotiating towards myself.
When requested to explain the method, not one of the defendants on the board seen the method as a enterprise negotiation.
“The testimony of key witnesses could also be as near an admission of a managed mentality as a shareholder plaintiff will ever get,” she discovered.
Solely Linda Johnson Rice, who ran her personal publishing firm, had no compromising ties to Musk, and she or he left the board after simply two years, letting her inventory choices expire unexercised.
“Ultimately, the important thing witnesses mentioned all of it: They had been there to work with Musk, not negotiate towards him,” McCormick wrote, concluding that Musk “exercised the utmost affect a supervisor can exert over an organization.”