Elon Musk’s $55.8 billion Tesla compensation package, revoked by a Delaware court earlier this year, could see an unexpected revival under proposed Delaware corporate law amendments drafted with input from Tesla’s legal team. The legislation seeks to redefine shareholder “controller” thresholds, potentially altering outcomes in Musk’s ongoing court battle.
Richards, Layton & Finger, the law firm representing both Musk and Tesla, confirmed its role in shaping the bill. Current law labels shareholders as controllers if they hold under 33% ownership but wield significant influence. The amendment would raise this threshold to a strict one-third ownership, directly addressing the court’s grounds for voiding Musk’s pay plan.
“This sends a strong signal to the Delaware Supreme Court that we want you to interpret this to give Elon his pay package back,” said Tulane law professor Ann Lipton.
Key implications of the bill include:
- Shifting controller criteria away from indirect influence
- Not explicitly banning retroactive application to pending cases
- Streamlining Delaware’s corporate governance framework
State Senator Bryan Townsend denies retroactive intent, stressing legislators retain final drafting control. Yet Yale corporate law expert Sarath Sanga warns: “Nothing in the law prevents courts from applying it to Musk’s case.”
The controversy stems from Chancellor Kathaleen McCormick’s January ruling, which found Tesla’s board failed to prove independence during 2018 pay negotiations. Critics argue the rushed legislative process – bypassing standard Corporate Law Council reviews – raises procedural concerns.
As Tesla shares face volatility, Delaware confronts dual pressures: maintaining its corporate governance leadership while adapting to modern executive compensation models. The bill’s fate could redefine controller liability standards for major shareholders nationwide.
