In a historic reversal, the Delaware Supreme Court on Friday, December 19, reinstated the 2018 compensation package for Tesla CEO Elon Musk.
The deal is now valued at around $139 billion. The decision overturns a lower court ruling from 2024 that had struck down the salary plan as “unfathomable.”
With this decision, a year-long battle began when a shareholder who owned just nine Tesla shares questioned the package.
In her 2024 decision, Delaware Court of Chancery Chancellor Kathaleen McCormick concluded that Tesla’s board had failed to demonstrate that the huge award was fair to shareholders, citing conflicts of interest and a lack of full disclosure.
However, the state’s highest court disagreed, stating in a 49-page opinion that completely rescinding the package was “inequitable” and “leaves Musk without compensation for his time and efforts over a six-year period.”
The 2018 package gives Musk stock options to buy about 304 million Tesla shares at a deep discount if the company hits ambitious financial and operational milestones (all of which the company has achieved).
The legal fight had important repercussions. Musk, outraged by the initial voiding of his pay, launched a fierce campaign against Delaware’s corporate legal system, calling it hostile to business and urging companies to incorporate elsewhere.
As a result, several high-profile companies, such as Coinbase and Roblox, moved their legal headquarters to states such as Texas and Nevada.
Musk celebrated the ruling on his social media platform X (formerly Twitter) and posted that he was “vindicated.”
In after-hours trading, Tesla shares rose slightly.
The reinstatement of the 2018 package comes just weeks after Tesla shareholders approved a new, even higher compensation plan for Musk in November.
That package could be worth up to $878 billion if the company meets extraordinary growth goals over the next decade.
Lawyers for the shareholder who originally challenged the 2018 deal said they were “considering our next steps” and were “proud to have participated in the historic verdict below.”
The Supreme Court decision cements Musk’s position as the world’s richest person, as this title is largely based on his stakes in Tesla and SpaceX.
