But it was approved a while ago, except for some reason Delaware went against precedent and disallowed it so they moved to Texas where it was re-approved.
> Delaware went against precedent and disallowed it
Board competence is super precedented. Normally the courts defer to business judgement to an obnoxious degree, but if the Board isn’t independent it can no longer be assured to be serving its fiduciary duty. (To investors majority and minority.)
The ruling was mostly not about board's competence but based on judge's opinion that during original vote the shareholders weren't properly informed about things.
Given that re-approval happened at similar levels of shareholders support, that judgement seems incorrect.
And yes, it is unprecedented as in "there's no similar ruling in Delaware history".
And I stress "similar", not the "board competence" idea you made up.
As you yourself noted, the precedent in Delaware is that judges stay away from second guessing boards or shareholders and this seems like an activist ruling, not something based on past Delaware rulings.
> ruling was mostly not about board's competence but based on judge's opinion that during original vote the shareholders weren't properly informed about things
That second bit of analysis never kicks in if Musk isn’t a “controlling shareholder.” Put another way, the ruling wouldn’t have been legal if the Board were deemed competent.
The Court found “Musk was the paradigmatic ‘Superstar CEO,’ who held some of the most influential corporate positions (CEO, Chair, and founder), enjoyed thick ties with the directors tasked with negotiating on behalf of Tesla, and dominated the process that led to board approval of his compensation plan,” thereby concluding “Musk controlled Tesla” [1].
This means the Court no longer defers to the company, but must decide if “the compensation plan was entirely fair.”
> it is unprecedented as in "there's no similar ruling in Delaware history"
What are you quoting?
In any case, you’re correct: the entire fairness doctrine has only needed to be applied by Delaware thrice before, in the 1980s [2] and then 2022 [3]. The novelty remains in Tesla’s closely-construed Board.
“Put simply, neither the Compensation Committee nor the Board acted in the best interests of the Company when negotiating Musk’s compensation plan. In fact, there is barely any evidence of negotiations at all. Rather than negotiate against Musk with the mindset of a third party, the Compensation Committee worked alongside him, almost as an advisory body.”
“The Board never asked the $55.8 billion question: Was the plan even necessary for Tesla to retain Musk and achieve its goals?”
“The incredible size of the biggest compensation plan ever—an unfathomable sum—seems to have been calibrated to help Musk achieve what he believed would make “a good future for humanity” [related to Musk’s goal of colonizing Mars]. [T]hat had no relation to Tesla’s goals with the compensation plan.”
> As you yourself noted, the precedent in Delaware is that judges stay away from second guessing boards or shareholders and this seems like an activist ruling, not something based on past Delaware rulings.
Revisiting and potentially invalidating decisions regarding compensation is like an entire standalone unit in business associations/corporate law classes. There are flow charts with forks named after precedential cases.
> The ruling was mostly not about board's competence
Because showing that was so trivial that it barely needed to be done. People working directly for Musk asserted they had no financial ties to him or any of his companies. The board fucked up within the first few lines of legal boilerplate of the agreement.
The remainder was trying to find out if anything within the agreement wasn't tainted by the boards fuckery.
