From: An Anonymous Talk Radio Listener [Email him]
The Delaware courts—which have jurisdiction over corporations incorporated in Delaware because of its formerly reliable corporate governance laws—have gone rogue, and Elon Musk is not the only one to suffer:
Thursday’s vote will leave unresolved the question of how much the lawyers who sued and won over the 2018 deal will take home. In March they asked the court to grant them 29mn Tesla shares—now worth more than $5bn—as a payment for their work. A court hearing is set for July.
Tesla has strongly opposed that request. Apart from airing its views in the shareholder proxy statement, it has added four powerhouse law firms to represent it in the pay case: national firms Sullivan & Cromwell and DLA Piper as well as two titans of the Delaware bar, Richard Layton and Morris Nichols.
Musk’s fury led him to move two of his other private companies to Texas and Nevada. Others have not yet rushed to join his exodus. Nevertheless, top lawyers have become concerned about companies with large controlling shareholders such as the Tesla CEO that increasingly are facing tough scrutiny from Delaware judges on M&A or other strategic actions.
The Musk pay decision is just one of a series of recent rulings that has dealt setbacks to corporate boards, a trend that has unsettled its corporate law establishment.
The decision that has elicited the most controversy is a March ruling that invalidated a contract that investment bank founder Ken Moelis struck with directors of his eponymous firm that forced the board to give him veto power over key corporate decisions.
Delaware’s legislature has sprung into action to consider changes to the state law in the coming weeks that would swing the pendulum back towards companies. The amendments under consideration would give businesses more freedom to strike contracts such as the Moelis arrangement with a small shareholder or group of shareholders. But professors and shareholder lawyers are worried that the basic idea of corporations, that boards must retain flexibility to make such decisions, is being threatened.
Why the Tesla shareholder vote won’t be the end of Elon Musk’s Delaware fight
A dispute over CEO’s record pay package has rattled the corporate bar—and it could be heading for uncharted legal territory
By Sujeet Indap, Financial Times, June 10, 2024
One FT commenter:
The ludicrous part of this whole saga is that shareholders were well-informed and did vote for this in 2018. It seems to me that this is proof enough that the board did not hoodwink anyone and did not breach their fiduciary duty. I was a shareholder and voted in 2018. I thought the potential options gains for Musk would be huge, but only if I and every other shareholder gained massively and we did. Every single goal was met and I’m very much better off for it. It is really sad to have the court overrule shareholders’ voices. Also sad that anyone who voted yes in 2018 would now vote no. Certainly not someone I would trust or want to do business with.
Companies need to hire more futurists to predict which states are going to go communist and when due to the nonwhite population explosion. Tesla and others were blindsided by the takeover of Delaware. They were told by their advisors that Delaware was a safe, corporate-friendly state, ignoring the growing black and Third World population, plus the largest gay resort on the East Coast. (Delaware was 83 percent white in 1980, 60 percent white in 2022.) While the state is still run by the same Irish Catholic Democrat machine, they used to fear the Republicans. Now they have no fear of Republicans but instead fear nonwhites taking their jobs and patronage. Reagan got 60% of the vote in Delaware in 1984, but Trump got about 40% in both 2016 and 2020. Trump will only win Delaware in 2024 with a national landslide and a failure of Democrat cheating in Wilmington
