The Delaware Supreme Court has reversed a prior ruling, reinstating a 2018 performance-based compensation agreement for Tesla CEO Elon Musk. The decision concludes a lengthy legal dispute over the multi-billion dollar award.
In its opinion, the court acknowledged procedural shortcomings in the original approval of the package but determined that completely voiding it years later would be unjust. The justices noted that rescinding the award would fail to compensate the executive for his leadership over a six-year period during which Tesla achieved significant growth targets.
The compensation plan, originally valued at approximately $56 billion, has appreciated substantially and is now estimated to be worth significantly more due to the increase in Tesla’s stock value. The reinstatement follows a recent shareholder vote that overwhelmingly approved the package for a second time.
The legal challenge was initially brought by a minority shareholder years ago, leading to a lower court voiding the award in 2024. That ruling criticized the board’s process and the influence of the CEO in setting his own compensation. The recent supreme court decision, while finding a technical breach of duty, awarded only nominal damages of one dollar to the plaintiff and allowed the compensation plan to stand.
The controversy had prompted public criticism from Musk and led Tesla to move its corporate legal home from Delaware to Texas. While some other companies have made similar moves in recent years, Delaware remains the predominant state of incorporation for major U.S. corporations.
The compensation package remains subject to stringent performance milestones related to market capitalization and operational goals, meaning the full value is contingent upon Tesla achieving specific, ambitious targets in the coming years.