Delaware Court of Chancery on Stockholder Ratification

On December 2, 2024, the Delaware Court of Chancery issued its latest decision in the ongoing saga of Elon Musk’s $55.8 billion compensation package, denying a motion to “‘vacate the relief’ ordered by the” Court, which Tesla asserted should result in a judgment being entered for Defendants on all counts—and allowance of the compensation package. Subsequent to the post-trial opinion by Chancellor McCormick in January 2024, Tesla appointed a new independent director to serve on a newly created independent committee, which issued a report recommending that stockholders approve the prior package. Tesla then sought and obtained a second stockholder ratification of the package (the “Stockholder Ratification”). In this latest opinion, the Court held that Tesla’s implementation of a renewed process reviewing the package and a second stockholder approval was both procedurally improper and substantively inadequate to justify modification of the post-trial order. Read A&O Shearman’s client alert here.