Delaware Judge Questions Tesla About Vote on Elon Musk’s Tesla Pay

A Delaware judge on Friday questioned lawyers for Tesla about why the company asked shareholders to vote on a $55 billion pay package for its chief executive, Elon Musk, after she had struck it down in January.

The judge, Chancellor Kathaleen St. J. McCormick of the Delaware Court of Chancery, noted at a hearing in Wilmington that there was no legal precedent for the company’s decision, which led to an overwhelming shareholder vote in favor of the compensation package in June.

“This has never been done before,” she said in an exchange with a lawyer representing Mr. Musk and Tesla’s directors. “There is no Delaware law on this, correct?”

The lawyer, David E. Ross, acknowledged there was no exact precedent for having shareholders overturn a judge’s decision in similar cases. But he asserted that the June vote showed that Tesla’s shareholders were willing to award Mr. Musk the package even after being provided a lot more information about how it had been devised.

”This was stockholder democracy working,” Mr. Ross said.

The back and forth over legal precedent is important because it could help determine whether Mr. Musk gets to keep stock options worth tens of billions of dollars. Tesla and Mr. Musk have said that the June shareholder vote addressed the problems that Chancellor McCormick cited in her decision to void the package and that it should be reason enough for her to reverse her decision.

Mr. Musk’s pay package, first approved by Tesla shareholders in 2018, was widely regarded at the time as the largest ever made by a public company. The package was set up to give Mr. Musk billions of dollars in stock options only if Tesla’s profits, sales and stock market value increased significantly.