Two weeks after a Delaware courtroom dominated that Tesla should rescind Elon Musk’s $56 billion pay bundle, the corporate’s board stays mum on what the choice means for shareholders or what’s subsequent for the mercurial CEO.

In her 200-page opinion on Jan. 30, Chancellor Kathaleen McCormick known as the pay plan the biggest in public company historical past, and mentioned it was agreed upon by folks “who had been beholden to Musk.” Since then, Musk has lashed out on the courtroom, posted “By no means incorporate your organization within the state of Delaware” on his social media platform X, and mentioned Tesla would maintain a shareholder vote to maneuver its web site of incorporation to Texas.

Tesla hasn’t but issued an SEC submitting to inform shareholders of the ruling.

The choice got here shortly after Musk indicated that he is pushing for much more management of Tesla, posting on X in mid-January that he wished roughly 25% voting management earlier than turning the corporate into a pacesetter in synthetic intelligence and robotics. Musk is already constructing an AI firm known as xAI exterior of Tesla.

The subsequent step within the compensation case is an “implementing order” that will likely be hashed out between the courtroom, Musk’s crew and the legal professionals representing shareholder Richard Tornetta, a former heavy steel drummer who was the plaintiff within the 2018 lawsuit filed on behalf of all Tesla buyers.

As shareholders await solutions, Tesla’s eight-person board, which incorporates Musk, his brother Kimbal, Chairwoman Robyn Denholm and former Tesla expertise chief JB Straubel, has stayed silent, avoiding any public feedback.

CNBC despatched requests for extra data to Tesla investor relations, Musk and a few board members. All of them went unanswered.

Greg Varallo, who was lead counsel for Tornetta and is head of the Delaware workplace of Bernstein Litowitz Berger & Grossmann, informed CNBC that theoretically Musk and his authorized crew might nonetheless pursue a last-minute settlement. Whereas Varallo mentioned he has no information of Musk’s plans, he mentioned he expects Musk to enchantment the choice to the Delaware state Supreme Courtroom.

“I might provide you with very excessive odds on that,” Varallo mentioned.

Kobi Kastiel, a regulation professor at Tel Aviv College, additionally predicts that Musk will enchantment the ruling. Kastiel wasn’t concerned within the litigation however he co-authored a 2023 paper within the Washington College Regulation Evaluate titled “Famous person CEOs and Company Regulation” that was cited in McCormick’s ruling.

“Given the excessive stakes concerned, it’s probably that Tesla will enchantment the choice,” Kastiel mentioned in an e-mail. Within the absence of a profitable enchantment, “any new compensation association with him must be assessed” in gentle of McCormick’s determination, Kastiel mentioned.

Within the 2018 CEO compensation plan, Tesla’s board awarded Musk a dozen tranches of inventory choices that may end vesting in 2022 and had been based mostly on milestones, together with many centered on inventory worth will increase.

Between the start of 2018 and the tip of 2022, Tesla shares soared virtually 500% as Musk promised to show Tesla into not only a dominant EV model, however a robotaxi firm and photo voltaic juggernaut, amongst different issues. The S&P 500 gained 44% over that stretch, whereas the Nasdaq rose 52%.

Eric Talley, a professor at Columbia Regulation College, informed CNBC that, ought to the ruling stand, Musk will lose his choices however not any shares he beforehand held. The transfer would lower the variety of shares excellent, probably bolstering the worth of every share held by buyers.

“A bunch of choices can be returned to Tesla’s coffers, which is vastly accretive to inventory worth,” mentioned Talley, who wasn’t concerned within the case. Alternatively, Talley identified, “Tesla has a really grumpy CEO who would possibly need to take his ball and go house. To this point, buying and selling suggests these two elements have been a wash.”

Tesla shares are down barely for the reason that Delaware courtroom’s determination in late January. They’re down near 25% for the yr, whereas main indexes are up.

Musk voiced a powerful choice for shifting his companies out of Delaware following the courtroom’s determination, and inspired others to take action as effectively.

He moved the incorporation location for his mind laptop interface firm, Neuralink, from Delaware to Nevada, filings revealed final week. He is additionally been a giant proponent of Texas lately, personally relocating there from California, and constructing large complexes for SpaceX and Tesla within the state, which has no private earnings taxes and a a lot decrease enterprise tax fee.

Creator Walter Isaacson, who printed a 688-page biography on Musk final yr, informed CNBC’s “Squawk Field” on Monday that if the ruling does not get overturned, “it’ll damage Delaware.”

“Individuals will say, ‘Wait, wait, you imply 5 years after one thing occurs, eight years after one thing occurs, you will return and undo it?'” Isaacson mentioned.

Tulane Regulation College professor Ann Lipton had a special take.

“It is a very thorough opinion and the Supreme Courtroom ought to give nice deference to the factual findings of the trial courtroom,” Lipton mentioned.

By way of what shareholders ought to ask of Tesla’s board now, Kastiel mentioned, ”Tornetta and up to date media studies on Musk have emphasised the significance of correct and detailed disclosure of the ties between controlling shareholders and administrators.”

There is a extra basic concern at play, Kastiel mentioned, relating to company governance in instances the place a “celebrity CEO” is operating the present.

“So long as the CEO is perceived as a star and the corporate depends upon the CEO’s imaginative and prescient and management, even nominally impartial administrators — these with out robust ties to the CEO — may have issue monitoring the CEO’s conduct,” he mentioned.

Kastiel additionally mentioned that the choice probably makes Musk and Tesla extra weak to different kinds of lawsuits.

“Plaintiffs could have a greater likelihood of advancing their claims by probably leveraging the Tornetta findings to argue that almost all of the Tesla board isn’t impartial of Musk,” he mentioned. “To mitigate this threat, Tesla might want to considerably improve the independence of its board and nominate new impartial administrators who should not have robust ties to Musk.”

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