Since this verdict, his reputation as Teflon-Elon is likely to be over. At the tech billionaire Elon Musk (52) seemed to have a lot going for him, he just had to appear cocky enough. But that didn’t work for Kathaleen McCormick (44). The presiding judge at the Court of Chancery in the US state of Delaware ruled against Musk, inflicting a serious defeat on one of the world’s most powerful entrepreneurs.
It was about a lavish salary package in shares worth around $56 billion from the automaker Tesla Musk granted it in 2018. A shareholder had filed a lawsuit against the salary agreement. His argument: This compensation is excessive. McCormick saw it that way too and declared the agreement void.
Elon Musk has to worry about his billion-dollar share package, which makes him the richest person in the world. Musk is number one on the billionaire lists by Bloomberg and Forbes. Bloomberg estimates his fortune at $205 billion, which includes the stock package. Without the $56 billion, he would be behind the head of the luxury group LVMH, Bernard Arnault (74), Amazon founder Jeff Bezos (60) and Meta boss Mark Zuckerberg (39).
A humiliation for Musk. The tech billionaire now wants to go with Tesla I’d rather move to Texas, as he announced on his short message service X, formerly Twitter. Companies would be better off locating there or in Nevada.
Musk can appeal the ruling to the Delaware Supreme Court. For now, however, he left it with attacks on his opponent at the Court of Chancery: He disparagingly calls McCormick an activist, a politician. They belong to the state of Delaware harmed more than any other judge in history
.
She has done more to damage Delaware than any judge in modern history
— Elon Musk (@elonmusk) February 2, 2024
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Musk’s anger could be seen by McCormick as confirmation that she has placed exactly the right needle pricks. Was the richest person in the world overpaid? McCormick asks this question and probes into the inner workings of the electric car company in her comments on her verdict. How should a corporate board deal with a “superstar CEO” like Musk? How much is enough and how much is too much?
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Inflicted a significant defeat on Elon Musk: Kathaleen McCormick is the first woman to head the Delaware Court of Chancery
Photo: Eric Crossan / Wikimedia / CC BY-SA 4.0
She calls it “the $55.8 billion question” and complains that the Tesla board of directors obviously didn’t ask itself. McCormick is familiar with large sums of money. Delaware’s Court of Chancery regularly deals with the largest and most high-profile M&A deals and legal disputes surrounding them. After all, numerous US corporations have their headquarters in the second-smallest US state because of the favorable tax rules.
The Court of Chancery is the body where major US corporate cases end up. Kathaleen McCormick has been a judge in this chamber since 2018, and in 2021 she was appointed chancellor by the Governor of Delaware, John Carney (67). She is the first woman to head the court.
Quiet and with a clear compass
Judge Katie, as she is often called, doesn’t let that stop her from getting to the root of injustices. Companions describe her as fearless: McCormick is not frightened by the possible consequences of her decisions. The 44-year-old is known for her high standards of responsible corporate management and her calm demeanor.
Kathaleen McCormick is from Delaware and grew up in the small town of Smyrna. Both her parents were teachers. After graduating from high school, she went to Harvard, where she studied philosophy. She received her law degree from the University of Notre Dame Law School in Indiana.
Not with ego, but with logic, reason and an open mind
Judge Kathaleen McCormick
Back in her home state, she worked for a few years as an attorney at Legal Aid, a branch of the Legal Aid Society that helps low-income people with legal issues. For example, it was about questions of discrimination in housing construction. She then joined Young Conaway Stargatt & Taylor, one of the state’s leading commercial law firms, and worked her way up to partner. She was already involved with the big players there too. Two thirds of the Fortune 500 companies, i.e. the 500 highest-grossing US companies, are based in Delaware. McCormick later said of her time at the commercial law firm: “They taught me a form of advocacy that suited my natural inclinations.” Difficulties in business, as in life, are best faced “not with the ego, but with logic, reason and openness Spirit”.
“Charge again, once more, dear friends!”
The open spirit also pervades the powerful reasoning in her judgment 201 pages
the ego confronts Musk. She asks whether there were serious negotiations between Musk and Tesla about the extent of compensation. After all, the board of directors should be committed to the interests of the shareholders. Was the board of directors independent? With her decision she would “boldly go where no man has gone before” – she writes, quoting Star Trek (“boldly go where no man has gone before”). She calls Musk’s salary package “historically unprecedented” and “unfair” and classifies the decision-making process as “flawed.” At another point she uses Shakespeare and Henry V: “once more unto the breach, dear friends, once more”. Translated, the king’s call to his soldiers means something like: “Charge again, once again, dear friends!”
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She took more than a year to make her decision and write the verdict. Already The process surrounding Musk’s legendary salary deal began in mid-November 2022. McCormick and Musk had already met before – and the judge had put Musk in his place then too. In July 2022, McCormick led the case against Musk when he wanted to back out of his $44 billion offer to take over Twitter. She emphasized that she wanted to protect the company and shareholders from harmful uncertainty. The Tesla founder finally gave in and completed the purchase that he actually no longer wanted to complete.