Pay package twice-approved by Tesla investors could sway courts
Elon Musk’s seemingly unbreakable bond with Tesla shareholders may be his superpower. That special relationship may very well be compelling enough to get him his $56bn pay deal which was rejected by the Delaware Court of Chancery for a second time last week. Musk has easily won two votes over the pay package, the second time this June even after an original scathing ruling in February from a trial court that held the Tesla board process around the original 2018 approval was tainted.
In fact, corporate law is quite hands-off on corporate decision-making. The exception to that deference arises when there are companies with directors beholden to dominant shareholders — thus putting smaller shareholders at risk of being steamrollered. Self-interested transactions, like “squeeze-out mergers” where minority shareholders can be forced to sell, had long been subjected to tough judicial scrutiny, arising from the inherent risk of coerced deal terms.
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