The Delaware Supreme Court heard arguments Wednesday in a landmark case over Elon Musk’s $56 billion Tesla compensation package, one of the largest in corporate history.
The appeal, following a January 2024 ruling by Chancellor Kathaleen McCormick, marks the final stage of a nearly two-year legal battle.
McCormick had struck down the 2018 pay plan, citing the Tesla board’s lack of independence and insufficient shareholder information.
The case’s outcome could impact Delaware’s corporate law and its Court of Chancery, a key venue for business disputes.
Tesla’s attorneys argued that shareholders were fully informed during the 2018 vote approving Musk’s compensation and again in 2024, when they reaffirmed it.
“This was the most informed stockholder vote in Delaware history,” said Jeffrey Wall, Tesla’s attorney.
The defendants, current and former Tesla directors, denied wrongdoing, asserting McCormick misapplied the law by using a strict standard instead of the “business judgment” rule.
They argued the package incentivized Musk to transform Tesla into a global leader, with stock options now valued at $120 billion due to the company’s success.
The 2024 ruling prompted Tesla, Dropbox, and Andreessen Horowitz to relocate their legal homes to Texas or Nevada, where courts favor directors.
This “Dexit” trend led Delaware to overhaul its corporate laws.
If Musk loses, a $25 billion replacement deal awaits, aimed at focusing him on Tesla’s shift to robotics and autonomous driving.
Tesla’s board also proposed a $1 trillion compensation plan, signaling confidence in Musk despite market challenges.
The court is also reviewing a $345 million legal fee awarded to plaintiff Richard Tornetta’s attorneys.
A ruling, expected in months, could redefine executive pay and corporate governance.