Tornetta v. Musk
Delaware Court of Chancery
2024 WL 382424 (2024)
- Written by Sean Carroll, JD
Facts
Tesla, Inc.’s board of directors (defendant) approved an executive-compensation plan for its chief executive officer, Elon Musk (defendant). Musk was Tesla’s largest shareholder, holding 21.9 percent of company stock. The maximum value of the compensation was $55.8 billion. The plan was the largest potential compensation plan in market history. Musk had deep personal connections with the individuals who negotiated the plan on the company’s behalf, including a 15-year relationship with the chair of the compensation committee. Musk also had a 20-year relationship with another member, with whom Musk had gone on family vacations. Finally, Tesla’s general counsel had served as Musk’s personal attorney. A majority of disinterested Tesla shares voted to approve the compensation plan. Tesla shareholder Richard Tornetta (plaintiff) filed a shareholder derivative suit, claiming that Musk and the board breached their fiduciary duty to Tesla by approving the compensation plan.
Rule of Law
Issue
Holding and Reasoning (McCormick, J.)
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