{"id":133253,"date":"2024-12-04T15:47:47","date_gmt":"2024-12-04T08:47:47","guid":{"rendered":"https:\/\/hotvideos24.online\/?p=133253"},"modified":"2024-12-04T15:47:47","modified_gmt":"2024-12-04T08:47:47","slug":"the-4-fatal-flaws-in-teslas-bid-to-award-elon-musk-100-billion-according-to-the-judge-who-dashed-his-pay","status":"publish","type":"post","link":"https:\/\/hotvideos24.online\/?p=133253","title":{"rendered":"The 4 \u2018fatal flaws\u2019 in Tesla\u2019s bid to award Elon Musk $100 billion, according to the judge who dashed his pay"},"content":{"rendered":"<p> <script async src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js?client=ca-pub-3711241968723425\"\r\n     crossorigin=\"anonymous\"><\/script>\r\n<ins class=\"adsbygoogle\"\r\n     style=\"display:block\"\r\n     data-ad-format=\"fluid\"\r\n     data-ad-layout-key=\"-fb+5w+4e-db+86\"\r\n     data-ad-client=\"ca-pub-3711241968723425\"\r\n     data-ad-slot=\"7910942971\"><\/ins>\r\n<script>\r\n     (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script><br \/>\n<\/p>\n<p>The full-throated push to grant <a href=\"https:\/\/fortune.com\/company\/tesla\/\" target=\"_blank\" class=\"sc-93594058-0 fowfrQ  \" aria-label=\"Go to https:\/\/fortune.com\/company\/tesla\/\" rel=\"noopener\">Tesla<\/a> CEO Elon Musk a pay package now valued at $100 billion was shut down by a judge this week.\u00a0<\/p>\n<div>\n<p>In a 101-page <a href=\"https:\/\/courts.delaware.gov\/Opinions\/Download.aspx?id=372420\" target=\"_blank\" class=\"sc-93594058-0 fowfrQ  \" aria-label=\"Go to https:\/\/courts.delaware.gov\/Opinions\/Download.aspx?id=372420\" rel=\"noopener\">opinion<\/a>, Delaware Court Chancellor <a href=\"https:\/\/courts.delaware.gov\/chancery\/judges.aspx\" target=\"_blank\" class=\"sc-93594058-0 fowfrQ  \" aria-label=\"Go to https:\/\/courts.delaware.gov\/chancery\/judges.aspx\" rel=\"noopener\">Kathaleen McCormick<\/a> declined to reverse a previous decision to scrap Musks\u2019 pay. Essentially, she wrote, the arguments presented by the defense representing Tesla and some of its board members were \u201ccreative,\u201d but missed the mark. <a href=\"https:\/\/fortune.com\/company\/mccormick\/\" target=\"_blank\" class=\"sc-93594058-0 fowfrQ  \" aria-label=\"Go to https:\/\/fortune.com\/company\/mccormick\/\" rel=\"noopener\">McCormick<\/a> had previously rescinded Musk\u2019s pay in a prior ruling, and, after losing at trial, Tesla held a new stockholder say-on-pay vote in June 2024 in a bid to pay Musk what the Tesla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\u2019s pay as a way to undo the court\u2019s decision, which shareholders overwhelmingly did in a vote that garnered 72% support in June 2024.\u00a0<\/p>\n<p>Tesla told investors that the vote, which it called a \u201ccommon law ratification,\u201d could snuff out claims the board breached its fiduciary duty in awarding the pay plan. \u201cWhen properly implemented, common law ratification \u2018reaches back\u2019 to validate the challenged act as of its initial enactment,\u201d Tesla <a href=\"https:\/\/www.sec.gov\/ix?doc=\/Archives\/edgar\/data\/1318605\/000110465924053333\/tm2326076d15_def14a.htm\" target=\"_blank\" class=\"sc-93594058-0 fowfrQ  \" aria-label=\"Go to https:\/\/www.sec.gov\/ix?doc=\/Archives\/edgar\/data\/1318605\/000110465924053333\/tm2326076d15_def14a.htm\" rel=\"noopener\">wrote<\/a> to shareholders.<\/p>\n<p>The court soundly rejected that approach.\u00a0<\/p>\n<p>\u201cThere are at least four fatal flaws,\u201d McCormick wrote in her decision. \u201cThe large and talented group of defense firms got creative with the ratification argument, but their unprecedented theories go against multiple strains of settled law.\u201d (McCormick wrote in her decision that Tesla \u201clawyered up\u201d the day it filed its April proxy statement asking shareholders to ratify Musk\u2019s pay by adding five additional law firms to the list of attorneys representing the defendants in the pay lawsuit.)<\/p>\n<p>In a <a href=\"https:\/\/x.com\/Tesla\/status\/1863730393930735634\" target=\"_blank\" class=\"sc-93594058-0 fowfrQ  \" aria-label=\"Go to https:\/\/x.com\/Tesla\/status\/1863730393930735634\" rel=\"noopener\">post<\/a> on <a href=\"https:\/\/fortune.com\/company\/twitter\/\" target=\"_blank\" class=\"sc-93594058-0 fowfrQ  \" aria-label=\"Go to https:\/\/fortune.com\/company\/twitter\/\" rel=\"noopener\">X<\/a>, Tesla wrote that the court was wrong and that it planned to appeal the decision.<\/p>\n<p>\u201cThis ruling, if not overturned, means that judges and plaintiffs\u2019 lawyers run Delaware companies rather than their rightful owners \u2013 the shareholders.\u201d<\/p>\n<p>So what exactly led McCormick to her decision? Here are the \u201cfour fatal flaws,\u201d she outlined:<\/p>\n<p><strong>Fatal flaw #1: Tesla didn\u2019t have the procedural grounds to flip the court\u2019s decision<\/strong><\/p>\n<p>First, Tesla debuted the argument that a stockholder ratification vote was a \u201cpowerful elixir\u201d 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\u2019s lawyers later backed off that stance during oral argument in court, dropping the more aggressive language and instead seeking to \u201cmodify the remedy\u201d without challenging the court\u2019s findings. Still, McCormick wrote, lawyers requested \u201cjudgment entered for defendants on all counts,\u201d which would have been tantamount to overturning the court\u2019s decision in Tesla\u2019s favor.\u00a0<\/p>\n<p>\u201cSo, the \u2018only relief\u2019 sought by Defendants by the time of oral argument was to \u2018modify the remedy\u2019 of rescission and flip the entire outcome of the case in Defendants\u2019 favor,\u201d the judge wrote, emphasizing her point with a facetious: \u201cThat\u2019s all.\u201d<\/p>\n<p><strong>Fatal flaw #2: Timing. Common-law ratification can\u2019t be raised <\/strong><strong><em>after<\/em><\/strong><strong> an opinion post trial<\/strong><\/p>\n<p>Second, Tesla raised that common-law ratification defense <em>after <\/em>the opinion to rescind his pay package came post-trial\u2014a full six years after the case was filed, one and a half years after trial, and five months after the court\u2019s opinion, McCormick wrote. No court has ever allowed stockholder ratification after facts have been settled, with a sole <a href=\"https:\/\/law.justia.com\/cases\/delaware\/court-of-chancery\/1953\/94-a-2d-217-4.html\" target=\"_blank\" class=\"sc-93594058-0 fowfrQ  \" aria-label=\"Go to https:\/\/law.justia.com\/cases\/delaware\/court-of-chancery\/1953\/94-a-2d-217-4.html\" rel=\"noopener\">exception<\/a> during the past 70 years, McCormick wrote.\u00a0<\/p>\n<p>\u201cWherever the outer boundary of non-prejudicial delay lies, Defendants crossed it,\u201d she wrote. \u201cThe court declines to exercise its discretion to permit Defendants to raise the defense of stockholder ratification at this late stage.\u201d<\/p>\n<p><strong>Fatal flaw #3: Tesla\u2019s approach didn\u2019t stick to the established legal framework<\/strong><\/p>\n<p>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\u2019t enough to ratify a \u201cconflicted-controller transaction,\u201d which was how Musk\u2019s grant was described in McCormick\u2019s previous opinion rescinding his pay. \u201cConflicted-controller transactions present multiple risks to minority stockholders,\u201d she wrote. And particularly in this case, there is what is called\u00a0 \u201ctunneling risk,\u201d in which someone in control of a company can try to get ahead through related-party transactions.\u00a0<\/p>\n<p>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\u2019s approach didn\u2019t stick to the established framework required.\u00a0<\/p>\n<p>\u201cDefendants\u2019 failure to adhere to the framework for securing stockholder ratification in a conflicted-controller context offers an independent basis for rejecting the Ratification Argument,\u201d she concluded.\u00a0<\/p>\n<p><strong>Fatal flaw #4: Multiple material misstatements\u00a0<\/strong><\/p>\n<p>Finally, the April proxy statement that asked shareholders to ratify Musk\u2019s pay after the court rescinded it was \u201cmaterially misleading,\u201d McCormick wrote. She noted, \u201cthere are many ways in which the Proxy Statement mangles the truth\u201d but one prominent failure was that much of what Tesla told its stockholders in that proxy statement was either inaccurate or just plain misleading.<\/p>\n<p>Each of the four fatal flaws with the ratification argument were enough to trounce the motion to revise the decision, McCormick wrote.\u00a0<\/p>\n<p>\u201cTaken together, they pack a powerful punch.\u201d<\/p>\n<p>Tesla did not immediately respond to a request for comment.\u00a0<\/p>\n<\/div>\n<div data-cy=\"subscriptionPlea\"><b>How many degrees of separation are you from the globe&#8217;s most powerful business leaders? <\/b>Explore who made our brand-new list of the <a href=\"https:\/\/fortune.com\/ranking\/most-powerful-people\/?&amp;itm_source=fortune&amp;itm_medium=article_tout\" target=\"_self\" class=\"sc-93594058-0 fowfrQ  \" aria-label=\"Go to https:\/\/fortune.com\/ranking\/most-powerful-people\/?&amp;itm_source=fortune&amp;itm_medium=article_tout\" rel=\"noopener\">100 Most Powerful People in Business<\/a>. Plus, learn about the metrics we used to make it.<\/div>\n<p><script async src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js?client=ca-pub-3711241968723425\"\r\n     crossorigin=\"anonymous\"><\/script>\r\n<ins class=\"adsbygoogle\"\r\n     style=\"display:block\"\r\n     data-ad-format=\"fluid\"\r\n     data-ad-layout-key=\"-fb+5w+4e-db+86\"\r\n     data-ad-client=\"ca-pub-3711241968723425\"\r\n     data-ad-slot=\"7910942971\"><\/ins>\r\n<script>\r\n     (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script><br \/>\n<br \/><div data-type=\"_mgwidget\" data-widget-id=\"1660802\">\r\n<\/div>\r\n<script>(function(w,q){w[q]=w[q]||[];w[q].push([\"_mgc.load\"])})(window,\"_mgq\");\r\n<\/script>\r\n<br \/>\n<br \/><a href=\"https:\/\/fortune.com\/2024\/12\/03\/the-4-fatal-flaws-in-tesla-bid-to-pay-elon-musk\/\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>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.\u00a0 In a 101-page opinion, Delaware &hellip; <a href=\"https:\/\/hotvideos24.online\/?p=133253\" class=\"more-link\">Read More<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-133253","post","type-post","status-publish","format-standard","hentry","category-business","entry"],"_links":{"self":[{"href":"https:\/\/hotvideos24.online\/index.php?rest_route=\/wp\/v2\/posts\/133253","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hotvideos24.online\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hotvideos24.online\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hotvideos24.online\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/hotvideos24.online\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=133253"}],"version-history":[{"count":0,"href":"https:\/\/hotvideos24.online\/index.php?rest_route=\/wp\/v2\/posts\/133253\/revisions"}],"wp:attachment":[{"href":"https:\/\/hotvideos24.online\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=133253"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hotvideos24.online\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=133253"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hotvideos24.online\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=133253"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}