Who Is Kathaleen McCormick, the Delaware Judge Not Taking Elon Musk’s Nonsense?
Kathaleen McCormick, who made headlines after negating Elon Musk’s $56 billion Tesla pay package last month, is the person who keeps every corporate board room on their toes. As chancellor of the Delaware Court of Chancery, tasked with hearing shareholder disputes and corporate governance litigation for companies registered in the state, McCormick plays a pivotal role in shaping the nation’s approach to governing large companies and reigning in their CEOs. Two-thirds of Fortune 500 companies and 93 percent of IPOs are registered in Delaware. Musk is not the first to face McCormick’s no-nonsense approach, and he certainly won’t be the last.
McCormick, 44, took her current role of chancellor in May 2021, after serving as a vice chancellor for the court for two years. Born in Dover, Del., and growing up in the nearby town of Smyrna, which boasts a population of just over 13,000 today, she is the first woman to rise to the role in the state’s history. A daughter of two public school teachers, McCormick attended Harvard University as a philosophy major and later received a law degree from the University of Notre Dame in Indiana.
After graduation, McCormick returned to Delaware to join the Community Legal Aid Society, a local organization assisting low-income people in civil cases who have no access to an attorney. Later she joined the Young Conaway Stargatt & Taylor, the state’s second-largest law firm.
In 2018, McCormick was appointed to be a vice chancellor to the Court of Chancery by Democratic Governor John Carney and was confirmed by the Delaware Senate. In 2021, after then-Chancellor Andre Bouchard’s resignation, McCormick was nominated for the top job and sworn in in May, starting her 12-year term.
A reputation for protecting shareholder interests
McCormick has a reputation for consistently delivering decisions that prioritize fair corporate governance and protect the interests of shareholders. In 2022, she made a first-of-its-kind ruling in a merger and acquisition case where the CEO of Mindbody, a software maker, and its private equity acquirer Vista, were jointly liable for flaws in a $1.9 billion transaction. McCormick argued the then-CEO of Mindbody had failed to do what was best for the company’s shareholders by offering an artificially reduced price to his favored buyer, Vista.
In another merger and acquisition case in 2021, McCormick ruled that the private equity firm Snow Phipps Group had to follow through with an agreement to purchase DecoPac, the owner of a cake decoration company. This was one of the many “busted deal” cases where buyers attempted to backpedal deals negatively impacted by the Covid-19 pandemic.
While Delaware has a long-standing reputation for corporate friendliness, Musk recently complained on X, “Never incorporate your company in the state of Delaware,” after McCormick voided his giant Tesla (TSLA) pay package (He has the option to appeal the case at a higher court). Since then, Musk has moved the registrations of two of his companies, SpaceX and Neuralink, from Delaware to Texas. He has pledged to do the same with Tesla, though the decision will be subject to a shareholder vote, given Tesla’s public status.
Musk has not always felt Delaware’s courts were against him. In 2016, the Court of Chancery sided with Musk when shareholders sued Tesla for overpaying in the acquisition of SolarCity, a solar energy company founded by Musk’s cousins.
It’s a different story after McCormick took charge. In 2022, the judge played a crucial role in thwarting Musk’s attempt to back out of buying Twitter, compelling him to honor the $44 billion deal. This decision showcased her firm stance against reneging on contractual obligations and protecting the interests of then-Twitter’s shareholders.