New Delaware bill could restore Elon Musk's lost pay package

In Delaware, a law firm known for representing Tesla and Elon Musk has drafted a piece of legislation intended to amend the Delaware General Corporation Law. This proposed bill, introduced in early 2024, aims to change rules regarding the classification of shareholders as 'controllers,' which previously led to the revocation of Musk's significant pay package from Tesla. Musk's $55.8 billion compensation plan was rescinded due to its approval process being called into question by the Delaware Court of Chancery, which ruled that Tesla's board, influenced by Musk, was not independent during the negotiations. The court's decision was a reaction to the alleged self-dealing and lack of independence among board members, who were said to have been misled during the approval of Musk's pay package. The proposed law would require that a shareholder must hold at least a third of a company’s shares to be considered a 'controller,' a drastic shift from current regulations that allow lesser shareholders to be classified as 'controllers' if they exert significant control. Legal experts are divided regarding the potential impact of this new legislation on Musk's compensation package, which is currently under appeal. Some suggest that the absence of explicit language preventing the bill's application to pending cases opens a door for re-evaluation of Musk's situation, which has drawn criticism about taking judicial scrutiny away from major corporate decisions. Although the bill's sponsors insist it is not retroactive and would not influence ongoing litigation, its provisions mean that the criteria for determining 'controller' status may allow Musk to effectively regain access to the pay package he previously lost. The response to the proposed legislation has been mixed. While some view it as a necessary adjustment to stimulate business and protect shareholders, others are concerned that it could undermine minority investor protections in favor of facilitating executive decision-making. Prominent executives have criticized the Delaware judicial climate, arguing that it has become excessively stringent regarding 'controller' transactions. The outcome of the situation hinges on further developments in the legislative process and how courts interpret the new provisions if enacted.