Delaware Supreme Court Reinstates Musk’s Record-Setting 2018 Tesla Compensation Plan

The Delaware Supreme Court has reinstated Elon Musk’s 2018 CEO compensation package from Tesla, reversing lower-court rulings that had twice voided the award and bringing an end to a yearslong legal fight over one of the largest pay packages in corporate history, according to CNBC.

In a per curiam decision issued Friday, the court ruled that the Delaware Court of Chancery erred in canceling the pay plan outright. The justices said rescinding the award was “inequitable” because it “leaves Musk uncompensated for his time and efforts over a period of six years.” The Supreme Court reversed the rescission remedy and awarded $1 in nominal damages.

The compensation plan, approved by Tesla shareholders in 2018, granted Musk the option to purchase about 303 million split-adjusted shares through 12 milestone-based tranches tied to market capitalization and operational goals. When the award vested, it was valued at roughly $56 billion. At Friday’s closing share price, the package would be worth about $139 billion.

The case arose from a derivative lawsuit filed in 2018 by Tesla shareholder Richard J. Tornetta, who accused Musk and the Tesla board of breaching their fiduciary duties. In January 2024, Delaware Chancery Court Chancellor Kathaleen McCormick ruled that the pay plan had been improperly granted. She found that Musk “controlled Tesla” and that the process leading to board approval was “deeply flawed,” including failures to disclose all material information to shareholders before seeking their vote. Although shareholders approved the package twice, McCormick rejected it both times, writing that the Tesla board “bore the burden of proving that the compensation plan was fair, and they failed to meet their burden.”

The Supreme Court disagreed with the remedy imposed. In its opinion, the justices said the lower court’s decision to cancel the plan entirely was too extreme and noted that Tesla had not been given the opportunity to determine what a fair compensation award might look like. The ruling restores the 2018 pay package but leaves other aspects of the Chancery Court’s decision untouched.

Legal scholars emphasized that distinction. Dorothy Lund, a professor at Columbia Law School, told CNBC that while the decision revives the pay plan, it does not undo earlier findings about governance failures. “The court had previously decided that Musk was a controlling shareholder of Tesla and that the Tesla board and he arranged an unfair pay plan for him,” she said. “None of that was reversed in this decision.”

CNBC wrote that lawyers for Tornetta echoed that view in an emailed statement, saying, “We are proud to have participated in the historic verdict below, calling to account the Tesla board and its largest stockholder for their breaches of fiduciary duty.”

Musk responded to news of the ruling on X, writing, “Thank you for your unwavering support.”

Musk is already the world’s richest person, with an estimated net worth in excess of $600 billion, largely due to his Tesla holdings and his stake in SpaceX, which he plans to take public as early as next year. Tesla shares are trading near record highs.

The ruling also nullifies a shareholder-approved contingency plan that would have replaced Musk’s 2018 compensation if the appeal had failed. Separately, Tesla shareholders approved a new, much larger CEO pay package for Musk in 2025, consisting of 12 tranches tied to future milestones and potentially worth up to $1 trillion over the next decade.

The Supreme Court’s decision likely closes the final chapter of the Tornetta litigation and restores the compensation plan that helped cement Musk’s status as the wealthiest individual in the world, even as broader questions about Tesla’s corporate governance remain unresolved.