What will happen to Musk’s $56bn pay package?

Zohar Goshen, a professor at Columbia Law School, said it was unclear whether such a move would convince McCormick. “It’s hard to estimate how the court will rule because there is too much noise around this decision,” Goshen said.

If Tesla fails to convince McCormick to change her ruling, which she has not yet made effective, Tesla plans to appeal all the way to the Delaware supreme court, a process that will take many months.

Tesla is also asking for shareholder approval at its annual meeting on Thursday to move its corporate domicile to Texas, outside the reach of Delaware courts. It has said it does not plan to use the move to ignore McCormick’s ruling, and she has accepted those assurances.

Tesla could also face more litigation from some shareholders. One of them this month filed a lawsuit challenging the upcoming shareholder vote on Musk’s pay package and the change of domicile.

What happens if shareholders vote no?

Tesla has said it is “determined” to pay Musk for his previous work through the 2018 plan or a new one, to ensure he devotes his time and energy to the company.

It can still try to reverse McCormick’s decision in Delaware, but it will have a weaker hand if shareholders reject the package. Given the appeal could take Tesla beyond next year’s annual shareholder meeting, this could give the board some breathing space before it has to negotiate a new pay package with Musk.

Tesla argues that the costs to shareholders will be significantly greater if the pay package is not reinstated. The company booked a $2.3bn accounting charge to issue it in 2018.

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