The Advisors' Blog

Here it is! The Delaware Supreme Court’s decision on Musk’s compensation we’ve been waiting for.

On Friday, the Court issued its decision in In re Tesla, Inc. Derivative Litigation. The case was heard en Banc (all the justices) and it was issued per curium (not authored by or attributed to a specific judge). The decision was 49 pages. Not short, necessarily, but also not a novel, so it won’t take too much of your time to read the whole thing. The comparative brevity may not be surprising given this:

Although the Justices have varying views on the liability determination, we agree that rescission was an improper remedy and therefore choose that narrower path to resolve this appeal.

As Law Prof Ann Lipton notes on the Business Law Prof Blog:

[T]he Delaware Supreme Court did not question any of Chancellor McCormick’s actual findings regarding how Musk’s 2018 pay package was negotiated, the control and interference that Musk exercised over the process, or even the unfairness of the award itself. Instead, the sole basis for the holding is a kind of Rumpelstiltskin argument: the plaintiffs used the word “rescission” when requesting a remedy, but this case does not meet the technical requirements for rescission – because rescission requires that both parties be restored to the status quo ante, and there’s no way to give Musk back his years working for Tesla after 2018. “It is undisputed,” said the Court, “that Musk fully performed under the 2018 Grant, and Tesla and its stockholders were rewarded for his work.” [Links added by me]

Since rescission was not the appropriate remedy, and the plaintiff “did not offer another form of appropriate relief, the most he can receive is an ‘assessment of nominal damages.’” The Court ultimately awarded $1 to Tornetta.

Various media outlets reported that the compensation package is now worth $139 billion. The WSJ says that amount is “more than the combined compensation realized by the CEOs of all other S&P 500 companies over the decade ending last year, according to Equilar, a pay data firm.” They also note that, while this outcome likely means that the $23.7 billion interim award Tesla announced in August – which was intended to make up for the 2018 option award and structured to avoid “double dipping” if he ended up being entitled to his original 2018 award as he now is (I guess that $0 accounting value was a good guess) – the same is not true of the most recently approved space station of a pay package.

– Meredith Ervine