The Delaware Supreme Court has restored Elon Musk’s 2018 Tesla compensation package, reversing a lower court ruling that had voided the deal and reignited debate over corporate governance and executive pay.
The decision ends two years of legal uncertainty surrounding a pay plan once valued at $56 billion and now estimated at roughly $139 billion based on Tesla’s recent share price.
The 2018 pay package granted Musk options to acquire about 304 million Tesla shares at a discounted price if the company achieved a series of performance milestones.
Tesla met those targets, transforming itself from a struggling startup into one of the world’s most valuable companies.
Despite shareholder approval, Musk never exercised the options after the plan was challenged in court by investor Richard Tornetta, who owned nine Tesla shares.
In 2024, following a five-day trial, Delaware Chancery Court Judge Kathaleen McCormick ruled that Tesla’s directors were conflicted and that shareholders lacked key information when approving the deal.
She ordered the compensation plan rescinded, describing it as “unfathomable.”
On Friday, the Delaware Supreme Court overturned that decision, concluding that rescinding the plan left Musk uncompensated for six years of work.
The ruling marked a significant reversal that followed public criticism from Musk and concerns that Delaware’s reputation as a business-friendly jurisdiction had been damaged.
Musk had accused Delaware judges of hostility toward technology founders and encouraged companies to reincorporate elsewhere.
Several firms, including Dropbox, Roblox, The Trade Desk and Coinbase, subsequently moved their legal homes to Nevada or Texas, though Delaware remains the dominant domicile for U.S. public companies.
Tesla’s board has warned that Musk could leave the company without the compensation and greater voting power he seeks.
In November, shareholders approved a new pay package that could be worth up to $878 billion if Tesla meets ambitious targets related to self-driving vehicles, robotaxis and humanoid robots.
Tesla has since reincorporated in Texas and adopted measures designed to limit shareholder lawsuits over future compensation plans.