Delaware Judge Kathaleen St. J. McCormick faced swift and intense social media criticism after blocking Elon Musk’s multibillion-dollar Tesla Inc. pay package for the second time. The backlash underscores the pressures of ruling against one of the world’s wealthiest and most influential figures.
Musk took to X (formerly Twitter), calling the ruling “absolute corruption,” while Tesla advocate Cathie Wood criticised McCormick as an “activist judge at its worst,” accusing her of disregarding shareholder rights. Other Musk supporters labelled the decision “insane.”
McCormick’s History with Musk
McCormick, chief judge of Delaware’s Chancery Court, is no stranger to Musk-related controversies. In January, she voided his pay package, stating that Tesla’s board was overly aligned with him, drawing ire from his followers. Similarly, in 2022, she blocked Musk from backing out of a $44 billion agreement to acquire X’s predecessor, Twitter.
Columbia University law professor Eric Talley noted that cases involving high-profile figures like Musk often attract amplified scrutiny.
“These kinds of cases are particularly amped-up,” Talley said.
Neither McCormick nor Musk responded to requests for comment on Tuesday.
Tesla’s Pay Package
Initially valued at $2.6 billion, Musk’s compensation package soared to $56 billion by January when McCormick invalidated it. At Tesla’s Monday closing price, the package was worth $101.5 billion. Following the ruling, Tesla’s shares fell 1.6% on Tuesday.
Musk, who commands a vast online following of 206 million on X, frequently leverages his platform to galvanise supporters, many of whom are retail Tesla investors. Anonymous X users joined the fray, with one account posting, “She needs to be in jail,” in reference to McCormick.
A Business Exodus?
Musk warned that McCormick’s decision could prompt a corporate exodus from Delaware, the legal domicile for two-thirds of Fortune 500 companies. He has already moved Tesla, SpaceX, and other ventures to Texas, citing its more lenient regulations and newly established business-court system.
Mixed Reactions
While McCormick faces sharp criticism, some legal experts commend her for upholding judicial independence.
“She has shown a great deal of courage and integrity not to back down,” said Jill Fisch, a University of Pennsylvania law professor.
Ann Lipton, a corporate law professor at Tulane University, defended McCormick’s ruling, arguing that it aligns with Delaware law and reinforces that even someone as prominent as Musk must adhere to corporate governance norms.
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“Many of Musk’s supporters believe corporate managers like him shouldn’t be restrained,” Lipton said, adding that McCormick’s status as the first woman chief judge in Chancery makes her an even more visible target.
Analyst Perspective
Wedbush analyst Daniel Ives noted that McCormick’s decision was anticipated and might not be the final outcome. Tesla has already announced plans to appeal the ruling.
Broader Implications
McCormick’s ruling has reignited debates over corporate governance, executive compensation, and the influence of high-profile entrepreneurs. Her decision underscores the role of courts in holding even the most powerful individuals accountable, a principle central to Delaware’s reputation as a corporate law hub.
As Musk continues to wield his influence both online and in the boardroom, McCormick’s resilience and adherence to legal precedent serve as a counterbalance, ensuring that corporate executives operate within the boundaries of the law. Whether Tesla’s appeal succeeds or not, the case highlights the ongoing tension between accountability and influence in modern corporate governance.
