The Delaware Supreme Court has reinstated Elon Musk’s 2018 compensation package from Tesla, reversing a decision made last year by the state’s Chancery Court that had invalidated the award. The ruling, published Friday, restores a pay deal originally valued at $56 billion, which Bloomberg estimates would now be worth about $140 billion based on Tesla’s current share price.
Supreme Court Overturns Chancery Court Ruling
In a unanimous opinion, the judges said canceling the pay package left Elon Musk “uncompensated for his time and efforts over a period of six years.” The court found that undoing the award after Musk met all of its performance conditions was not justified under Delaware law.
The decision overturns a January 2024 ruling by the Delaware Chancery Court, which had agreed with a shareholder challenge arguing that the compensation package was improperly negotiated and that shareholders were not fully informed of conflicts of interest.
Background Of The 2018 Compensation Plan
The 2018 pay package set out a series of operational and market capitalization milestones that Musk was required to achieve to unlock its full value. According to court filings, Musk and Tesla ultimately met all of those targets.
The package was challenged shortly after it was approved, when shareholder Richard Tornetta filed suit in 2018. Tornetta argued that the deal was excessive and that Tesla’s board failed to adequately disclose conflicts tied to Musk’s influence. Musk and many Tesla supporters criticized the lawsuit, noting that Tornetta owned only nine shares of Tesla stock.
Shareholder Vote And Appeal Process
After years of litigation, including a trial in which Musk testified, the Chancery Court struck down the pay package in early 2024. Tesla later asked shareholders to vote again on the compensation plan at its 2024 annual meeting, where it was re-approved.
Despite that vote, the Chancery Court reaffirmed its decision in December 2024, prompting Tesla to appeal to the state’s highest court. The Delaware Supreme Court’s ruling now resolves that appeal.
Impact On Tesla’s Compensation Plans
Following the decision, Tesla is expected to revoke a separate $29 billion compensation package it offered Musk earlier this year. That package had been structured as a fallback in case the Delaware Supreme Court upheld the lower court’s ruling.
A separate compensation plan approved in November, which could be worth up to $1 trillion if Musk meets a new set of performance goals, remains in place and is not affected by the court’s decision.
Reaction And Corporate Fallout
Musk responded to the ruling with a brief post on X, writing “Vindicated,” and thanking supporters who backed him during the legal fight.
The prolonged dispute contributed to Musk’s decision to move Tesla’s incorporation from Delaware to Texas, a move that has since been mirrored by other companies citing concerns over Delaware corporate law.
Featured image credits: Flickr
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