In a recent development, Chancellor Kathaleen McCormick voided Elon Musk’s record pay package for Tesla and received assurance from the electric vehicle maker that they will not use an upcoming shareholder vote to challenge her ruling. This assurance was provided after the shareholder legal team expressed concerns about the possibility of the case being undermined in a Texas court. The upcoming vote is crucial as it will determine the fate of Musk’s $56 billion pay package and the decision to reincorporate Tesla in Texas.
The legal team representing the shareholders had raised the concern that Tesla and Musk could potentially reverse McCormick’s ruling by taking the case to another jurisdiction, such as Texas. However, Tesla dismissed these claims as “rank speculation” in court filings and reiterated that Delaware would retain jurisdiction over the dispute. Chancellor McCormick found comfort in these statements, believing that the company would not attempt to circumvent her decision.
In a seven-page letter, Chancellor McCormick highlighted the importance of accurate interpretation of the defendants’ position. She mentioned that if her interpretation was incorrect, the defense counsel had a duty to rectify it. However, she expressed confidence in the defendants’ statements, stating, “the defendants’ statements give me great comfort.”
On June 13, Tesla shareholders are set to vote on Musk’s pay package and the relocation of the company from Delaware to Texas. This decision holds significant implications as Texas is the primary location for Tesla’s headquarters, while Delaware serves as the legal home for many publicly traded companies. Additionally, Chancellor McCormick will need to determine whether the shareholder legal team should receive the requested $6 billion from Tesla as a legal fee before Musk and Tesla proceed with an appeal. A hearing has been scheduled for July 8 to address this matter.