• Education
    • Higher Education
    • Scholarships & Grants
    • Online Learning
    • School Reforms
    • Research & Innovation
  • Lifestyle
    • Travel
    • Food & Drink
    • Fashion & Beauty
    • Home & Living
    • Relationships & Family
  • Technology & Startups
    • Software & Apps
    • Startup Success Stories
    • Startups & Innovations
    • Tech Regulations
    • Venture Capital
    • Artificial Intelligence
    • Cybersecurity
    • Emerging Technologies
    • Gadgets & Devices
    • Industry Analysis
  • About us
  • Contact
  • Advertise with Us
  • Privacy & Policy
Today Headline
  • Home
  • World News
    • Us & Canada
    • Europe
    • Asia
    • Africa
    • Middle East
  • Politics
    • Elections
    • Political Parties
    • Government Policies
    • International Relations
    • Legislative News
  • Business & Finance
    • Market Trends
    • Stock Market
    • Entrepreneurship
    • Corporate News
    • Economic Policies
  • Science & Environment
    • Space Exploration
    • Climate Change
    • Wildlife & Conservation
    • Environmental Policies
    • Medical Research
  • Health
    • Public Health
    • Mental Health
    • Medical Breakthroughs
    • Fitness & Nutrition
    • Pandemic Updates
  • Sports
    • Football
    • Basketball
    • Tennis
    • Olympics
    • Motorsport
  • Entertainment
    • Movies
    • Music
    • TV & Streaming
    • Celebrity News
    • Awards & Festivals
  • Crime & Justice
    • Court Cases
    • Cybercrime
    • Policing
    • Criminal Investigations
    • Legal Reforms
No Result
View All Result
  • Home
  • World News
    • Us & Canada
    • Europe
    • Asia
    • Africa
    • Middle East
  • Politics
    • Elections
    • Political Parties
    • Government Policies
    • International Relations
    • Legislative News
  • Business & Finance
    • Market Trends
    • Stock Market
    • Entrepreneurship
    • Corporate News
    • Economic Policies
  • Science & Environment
    • Space Exploration
    • Climate Change
    • Wildlife & Conservation
    • Environmental Policies
    • Medical Research
  • Health
    • Public Health
    • Mental Health
    • Medical Breakthroughs
    • Fitness & Nutrition
    • Pandemic Updates
  • Sports
    • Football
    • Basketball
    • Tennis
    • Olympics
    • Motorsport
  • Entertainment
    • Movies
    • Music
    • TV & Streaming
    • Celebrity News
    • Awards & Festivals
  • Crime & Justice
    • Court Cases
    • Cybercrime
    • Policing
    • Criminal Investigations
    • Legal Reforms
No Result
View All Result
Today Headline
No Result
View All Result
Home Business & Finance

The 4 ‘fatal flaws’ in Tesla’s bid to award Elon Musk $100 billion, according to the judge who dashed his pay todayheadline

December 4, 2024
in Business & Finance
Reading Time: 4 mins read
A A
0
The 4 ‘fatal flaws’ in Tesla’s bid to award Elon Musk $100 billion, according to the judge who dashed his pay
1
SHARES
3
VIEWS
Share on FacebookShare on Twitter

The full-throated push to grant Tesla CEO Elon Musk a pay package now valued at $100 billion was shut down by a judge this week. 

In a 101-page opinion, Delaware Court Chancellor Kathaleen McCormick declined to reverse a previous decision to scrap Musks’ pay. Essentially, she wrote, the arguments presented by the defense representing Tesla and some of its board members were “creative,” but missed the mark. McCormick had previously rescinded Musk’s pay in a prior ruling, and, after losing at trial, Tesla held a new stockholder say-on-pay vote in June 2024 in a bid to pay Musk what the Tesla board said it rightly owed him. Tesla chairperson Robyn Denholm told shareholders the board stood behind the compensation package, and rallied investors to reapprove Musk’s pay as a way to undo the court’s decision, which shareholders overwhelmingly did in a vote that garnered 72% support in June 2024. 

Tesla told investors that the vote, which it called a “common law ratification,” could snuff out claims the board breached its fiduciary duty in awarding the pay plan. “When properly implemented, common law ratification ‘reaches back’ to validate the challenged act as of its initial enactment,” Tesla wrote to shareholders.

The court soundly rejected that approach. 

“There are at least four fatal flaws,” McCormick wrote in her decision. “The large and talented group of defense firms got creative with the ratification argument, but their unprecedented theories go against multiple strains of settled law.” (McCormick wrote in her decision that Tesla “lawyered up” the day it filed its April proxy statement asking shareholders to ratify Musk’s pay by adding five additional law firms to the list of attorneys representing the defendants in the pay lawsuit.)

In a post on X, Tesla wrote that the court was wrong and that it planned to appeal the decision.

“This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners – the shareholders.”

So what exactly led McCormick to her decision? Here are the “four fatal flaws,” she outlined:

Fatal flaw #1: Tesla didn’t have the procedural grounds to flip the court’s decision

First, Tesla debuted the argument that a stockholder ratification vote was a “powerful elixir” that could cure wrongdoing in its April proxy statement, wrote McCormick. But Tesla had no grounds to flip the outcome of a court decision based on evidence it created after the trial took place, the opinion states. Tesla’s lawyers later backed off that stance during oral argument in court, dropping the more aggressive language and instead seeking to “modify the remedy” without challenging the court’s findings. Still, McCormick wrote, lawyers requested “judgment entered for defendants on all counts,” which would have been tantamount to overturning the court’s decision in Tesla’s favor. 

“So, the ‘only relief’ sought by Defendants by the time of oral argument was to ‘modify the remedy’ of rescission and flip the entire outcome of the case in Defendants’ favor,” the judge wrote, emphasizing her point with a facetious: “That’s all.”

Fatal flaw #2: Timing. Common-law ratification can’t be raised after an opinion post trial

Second, Tesla raised that common-law ratification defense after the opinion to rescind his pay package came post-trial—a full six years after the case was filed, one and a half years after trial, and five months after the court’s opinion, McCormick wrote. No court has ever allowed stockholder ratification after facts have been settled, with a sole exception during the past 70 years, McCormick wrote. 

“Wherever the outer boundary of non-prejudicial delay lies, Defendants crossed it,” she wrote. “The court declines to exercise its discretion to permit Defendants to raise the defense of stockholder ratification at this late stage.”

Fatal flaw #3: Tesla’s approach didn’t stick to the established legal framework

The third and potentially most significant flaw McCormick outlined had to do with the legal framework Tesla relied on. She wrote that the stockholder vote by itself wasn’t enough to ratify a “conflicted-controller transaction,” which was how Musk’s grant was described in McCormick’s previous opinion rescinding his pay. “Conflicted-controller transactions present multiple risks to minority stockholders,” she wrote. And particularly in this case, there is what is called  “tunneling risk,” in which someone in control of a company can try to get ahead through related-party transactions. 

Because of the significant risk, the court applies a stricter standard of review that requires specific steps be taken like an independent special committee review and an informed shareholder vote, among other requirements. Tesla’s approach didn’t stick to the established framework required. 

“Defendants’ failure to adhere to the framework for securing stockholder ratification in a conflicted-controller context offers an independent basis for rejecting the Ratification Argument,” she concluded. 

Fatal flaw #4: Multiple material misstatements 

Finally, the April proxy statement that asked shareholders to ratify Musk’s pay after the court rescinded it was “materially misleading,” McCormick wrote. She noted, “there are many ways in which the Proxy Statement mangles the truth” but one prominent failure was that much of what Tesla told its stockholders in that proxy statement was either inaccurate or just plain misleading.

Each of the four fatal flaws with the ratification argument were enough to trounce the motion to revise the decision, McCormick wrote. 

“Taken together, they pack a powerful punch.”

Tesla did not immediately respond to a request for comment. 

How many degrees of separation are you from the globe’s most powerful business leaders? Explore who made our brand-new list of the 100 Most Powerful People in Business. Plus, learn about the metrics we used to make it.

Tags: awardbidbillionCEO salaries and executive compensationcompensationdashedElonElon MuskfatalflawsjudgelawsuitMuskpayTeslaTeslastodayheadline
Previous Post

China calls on universities to provide ‘love education’

Next Post

Strips of prairie alongside crops can save the soil

Related Posts

NXP Semiconductors' SWOT analysis: stock resilience amid market shifts todayheadline

May 25, 2025
0
nvda stock

Nvidia Is Reportedly Considering a New AI Chip for China After Export Control Restrictions todayheadline

May 25, 2025
4
Next Post
Strips of prairie alongside crops can save the soil

Strips of prairie alongside crops can save the soil

  • Trending
  • Comments
  • Latest
Family calls for change after B.C. nurse dies by suicide after attacks on the job

Family calls for change after B.C. nurse dies by suicide after attacks on the job

April 2, 2025
Pioneering 3D printing project shares successes

Product reduces TPH levels to non-hazardous status

November 27, 2024

Hospital Mergers Fail to Deliver Better Care or Lower Costs, Study Finds todayheadline

December 31, 2024

Police ID man who died after Corso Italia fight

December 23, 2024
Harris tells supporters 'never give up' and urges peaceful transfer of power

Harris tells supporters ‘never give up’ and urges peaceful transfer of power

0
Des Moines Man Accused Of Shooting Ex-Girlfriend's Mother

Des Moines Man Accused Of Shooting Ex-Girlfriend’s Mother

0

Trump ‘looks forward’ to White House meeting with Biden

0
Catholic voters were critical to Donald Trump’s blowout victory: ‘Harris snubbed us’

Catholic voters were critical to Donald Trump’s blowout victory: ‘Harris snubbed us’

0
nvda stock

Nvidia Is Reportedly Considering a New AI Chip for China After Export Control Restrictions todayheadline

May 25, 2025
Luna Optics LN-G3-M50

Best night vision monoculars in 2025

May 25, 2025
Intravenous tenecteplase beneficial before endovascular thrombectomy

Intravenous tenecteplase beneficial before endovascular thrombectomy

May 25, 2025
Strauss' 'Blue Danube' waltz is launching into space to mark his 200th birthday

Strauss’ ‘Blue Danube’ waltz is launching into space to mark his 200th birthday

May 25, 2025

Recent News

nvda stock

Nvidia Is Reportedly Considering a New AI Chip for China After Export Control Restrictions todayheadline

May 25, 2025
4
Luna Optics LN-G3-M50

Best night vision monoculars in 2025

May 25, 2025
4
Intravenous tenecteplase beneficial before endovascular thrombectomy

Intravenous tenecteplase beneficial before endovascular thrombectomy

May 25, 2025
5
Strauss' 'Blue Danube' waltz is launching into space to mark his 200th birthday

Strauss’ ‘Blue Danube’ waltz is launching into space to mark his 200th birthday

May 25, 2025
4

TodayHeadline is a dynamic news website dedicated to delivering up-to-date and comprehensive news coverage from around the globe.

Follow Us

Browse by Category

  • Africa
  • Asia
  • Basketball
  • Business & Finance
  • Climate Change
  • Crime & Justice
  • Cybersecurity
  • Economic Policies
  • Elections
  • Entertainment
  • Entrepreneurship
  • Environmental Policies
  • Europe
  • Football
  • Gadgets & Devices
  • Health
  • Medical Research
  • Mental Health
  • Middle East
  • Motorsport
  • Olympics
  • Politics
  • Public Health
  • Relationships & Family
  • Science & Environment
  • Software & Apps
  • Space Exploration
  • Sports
  • Stock Market
  • Technology & Startups
  • Tennis
  • Travel
  • Uncategorized
  • Us & Canada
  • Wildlife & Conservation
  • World News

Recent News

nvda stock

Nvidia Is Reportedly Considering a New AI Chip for China After Export Control Restrictions todayheadline

May 25, 2025
Luna Optics LN-G3-M50

Best night vision monoculars in 2025

May 25, 2025
  • Education
  • Lifestyle
  • Technology & Startups
  • About us
  • Contact
  • Advertise with Us
  • Privacy & Policy

© 2024 Todayheadline.co

Welcome Back!

OR

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
No Result
View All Result
  • Business & Finance
  • Corporate News
  • Economic Policies
  • Entrepreneurship
  • Market Trends
  • Crime & Justice
  • Court Cases
  • Criminal Investigations
  • Cybercrime
  • Legal Reforms
  • Policing
  • Education
  • Higher Education
  • Online Learning
  • Entertainment
  • Awards & Festivals
  • Celebrity News
  • Movies
  • Music
  • Health
  • Fitness & Nutrition
  • Medical Breakthroughs
  • Mental Health
  • Pandemic Updates
  • Lifestyle
  • Fashion & Beauty
  • Food & Drink
  • Home & Living
  • Politics
  • Elections
  • Government Policies
  • International Relations
  • Legislative News
  • Political Parties
  • Africa
  • Asia
  • Europe
  • Middle East
  • Artificial Intelligence
  • Cybersecurity
  • Emerging Technologies
  • Gadgets & Devices
  • Industry Analysis
  • Basketball
  • Football
  • Motorsport
  • Olympics
  • Climate Change
  • Environmental Policies
  • Medical Research
  • Science & Environment
  • Space Exploration
  • Wildlife & Conservation
  • Sports
  • Tennis
  • Technology & Startups
  • Software & Apps
  • Startup Success Stories
  • Startups & Innovations
  • Tech Regulations
  • Venture Capital
  • Uncategorized
  • World News
  • Us & Canada
  • Public Health
  • Relationships & Family
  • Travel
  • Research & Innovation
  • Scholarships & Grants
  • School Reforms
  • Stock Market
  • TV & Streaming
  • Advertise with Us
  • Privacy & Policy
  • About us
  • Contact

© 2024 Todayheadline.co