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Why the fight over Elon Musk’s pay at Tesla won’t end with shareholder vote

Elon Musk speaks in front of a giant Tesla logo.

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Tesla shareholders will vote on Thursday on whether to restore the mammoth pay package for chief executive Elon Musk that was struck down by a Delaware judge this year. But that is not expected to close the book on a legal saga that has consumed the electric-car maker and the leading US business law court that dared to defy Musk and his overseers on the company’s board.

In asking shareholders to approve of the same 2018 pay package that was nullified by the Delaware Court of Chancery in January, Tesla is relying on a legal principle known as “ratification,” in which the validity of a corporate action can be cemented by a shareholder vote. Ratification, the company told shareholders in a proxy note earlier this year, “will restore Tesla’s stockholder democracy.”

This instance, however, is the first time a company has tried to leverage that principle after its board was found to have breached its fiduciary duty to approve the deal in the first place.

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