Who can rein in Elon Musk? Someone you’ve probably never heard of

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Elon Musk is rarely hemmed in. He is notoriously unmoved by critics, whether they’re shareholders in his companies, commentators in the media or federal regulators, who are ostensibly in charge of protecting investors and the public from the worst of his excesses.

But this week, a Delaware state judge handed down a message that Musk and other powerful men in America seldom hear: Nope.

Kathaleen McCormick, the soft-spoken, even-keeled head of the Court of Chancery in Delaware — the state in which many of the nation’s biggest businesses are incorporated — struck down Musk’s 2018 Tesla pay package on Tuesday, siding with a shareholder who’d challenged it as excessive.

The ruling, which is almost certain to face an appeal, could take a serious bite out of Musk’s personal fortune, potentially wiping out more than $51 billion in assets. (Of course, even then he’d still be the third richest person on the planet, according to Bloomberg.)

The outcome of Musk’s pay package dispute is the latest instance of a towering, brash business leader getting put in his place by the one institution powerful enough to do so: US courts.

Just days before McCormick’s ruling in Delaware, a New York jury ordered former President Donald Trump to pay $86 million in damages to a woman that a prior jury established Trump sexually assaulted in the 1990s. In the same week, Vince McMahon, the longtime head of World Wrestling Entertainment who for years managed to dodge and deflect allegations of sexual misconduct, resigned as executive chairman following a lawsuit from one his former employees accusing him of sex-trafficking and abuse. McMahon has denied the allegations.

Kathaleen McCormick struck down Elon Musk’s 2018 Tesla pay package after an investor challenged it as excessive.

Among the threads connecting Musk, Trump and McMahon is a history of evading negative consequences. But this week’s court rulings (or in McMahon’s case, the prospect of one) illustrate the limits that even the most powerful figures can hit when faced with legal action.

“If you regulate things up front, they won’t get to the point of festering to the extent where you got these $56 billion decisions,” Columbia Law professor Eric Talley tells me, referring to McCormick’s ruling on Musk. “The US, compared to almost any other developed country, has pushed itself much more towards the litigation side.”

Considering the circumstances of the Musk pay dispute, Trump’s defamation bill and McMahon’s looming legal battles, Talley says they may represent three examples of people who were wagering that the litigation system didn’t pose a threat.

“Their wager went south,” he says. “And if that’s the case, let that be a message to other people: The litigation system actually does work.”

The pay package dispute wasn’t McCormick’s first rodeo with Musk.

In 2022, she oversaw Twitter’s lawsuit against Musk when he tried to renege on his $44 billion contract to buy the company. McCormick showed little patience for Musk’s stalling tactics in that case, and he ended up going through with the purchase of Twitter, which he renamed X.

While McCormick didn’t have to issue a final decision Twitter case, her preliminary rulings suggested she wasn’t going to be cowed by Musk’s towering profile, Talley says.

“We’ve got this Delaware judge who says, ‘You know what? The rules that apply to everyone apply to you too.’” Talley said. “I think that’s service to the profession. And it’s not one that is well compensated — Katie McCormick is not earning $55 billion for her work.”