Elon Musk’s long-delayed 2018 compensation package from Tesla, once valued at $56 billion, was reinstated on Friday after the Delaware Supreme Court overturned a lower court ruling that had scrapped the deal. The decision ends a two-year legal saga that froze what was once the largest executive pay package in corporate history and reignited debate over governance, founder power and judicial oversight.
The ruling reverses a 2024 decision by Delaware Judge Kathaleen McCormick, who had concluded after a five-day trial that Tesla’s board was conflicted and failed to fully inform shareholders when they approved Musk’s pay plan. McCormick had described the package as “unfathomable” and ordered it rescinded, a move that triggered sharp criticism from Musk and raised concerns about Delaware’s reputation as a business-friendly legal hub.
Musk’s 2018 pay deal was structured entirely around performance, granting him options to buy roughly 304 million Tesla shares at a steep discount if the company met a series of ambitious milestones. At the time, Tesla estimated the package could be worth up to $56 billion. As the company’s stock surged in subsequent years, the potential value of the options swelled to around $120 billion by early November, representing about 9% of Tesla’s outstanding shares.
Despite shareholder approval in 2018, Musk never collected the options after a lawsuit was filed by Richard Tornetta, a shareholder who owned just nine Tesla shares. The case ultimately led to the lower court’s decision to void the plan, casting uncertainty over Musk’s compensation for years during which Tesla rose from a precarious electric vehicle startup to one of the world’s most valuable companies.
The Supreme Court’s ruling delivers a decisive victory for Musk, who has argued that Delaware courts have become hostile to tech founders and overly interventionist. Following the earlier ruling, he publicly urged companies to abandon Delaware as their legal home. Several high-profile firms, including Dropbox, Roblox, Coinbase and The Trade Desk, subsequently reincorporated in states such as Texas and Nevada, though Delaware remains the dominant jurisdiction for U.S. public companies.
Tesla’s board has repeatedly warned that Musk, who also leads SpaceX and artificial intelligence venture xAI, could walk away from the electric carmaker if he is denied the compensation and increased voting power he seeks. Those concerns helped drive shareholder approval in November of a new pay package that could be worth as much as $878 billion if Tesla meets ambitious targets tied to self-driving technology, a robotaxi network and sales of humanoid robots.
In parallel, Tesla has moved to limit future legal challenges. Now incorporated in Texas, the company can require that any investor or group of investors hold at least 3% of Tesla’s stock before filing a lawsuit over alleged corporate law violations. Such a stake would be worth roughly $30 billion, a threshold that only Musk himself currently meets, significantly reducing the likelihood of another small-shareholder challenge tying up executive pay in court.
