Delaware Supreme Court restores $55 billion Tesla pay package for Elon Musk

The Delaware Supreme Court on Friday reversed a lower-court ruling and reinstated the 2018 Tesla pay package that could pay Elon Musk up to $55 billion, a decision that would further expand his wealth and influence over the electric-vehicle maker. The court said the 2018 plan should be restored, restoring a package that had been voided by a January 2024 ruling and overseeing a long-running dispute over corporate governance and executive compensation at Tesla.

The package was designed as an incentive for Musk to push Tesla toward ambitious performance milestones, including a leap in market value. When the plan was crafted in 2018, Tesla’s value hovered in the $50 billion to $75 billion range as the company sought to scale production and broaden demand for its vehicles. By the following years, manufacturing problems eased and demand surged, helping to lift Tesla’s stock price and, with it, the likelihood that Musk would collect the payout. The court’s decision centers on how the package was created and whether the board acted independently rather than being overly aligned with Musk. The ruling also awarded Tesla $1 in nominal damages.

In its 49-page ruling, the Delaware Supreme Court said multiple errors in Chancellor Kathaleen St. Jude McCormick’s 2024 decision warranted overturning the earlier ruling and reinstating the 2018 pay package. The justices cited concerns about the process by which the plan was approved and the degree to which the board remained independent from Musk during negotiations. The opinion also noted testimony from Musk in a 2022 trial as part of the evidentiary record.

The decision comes as Tesla’s leadership and governance framework continue to evolve. In January 2024, McCormick voided the pay package, a ruling that prompted Musk to relocate Tesla’s incorporation from Delaware to Texas, a move he described as a response to what he viewed as overreach by the Delaware legal system. The board subsequently sought to soothe investor concerns and maintain Musk’s commitment by seeking shareholder reaffirmation of the package, which occurred about 18 months ago and was approved.

Separately, Tesla’s board also crafted a newer, far more expansive pay plan that could pay Musk up to $1 trillion if he achieves a series of ambitious growth targets over the next decade. That plan was approved by shareholders last month, reflecting a continued willingness among investors to align compensation with dramatic expansion goals. The package envisions boosting Tesla’s market capitalization from about $1.6 trillion to roughly $8.5 trillion over ten years, a target that would represent a historic leap in scale for a former automotive start-up.

The Delaware ruling effectively restores the 2018 package’s framework, meaning Musk could be eligible for the full amount if the performance hurdles are met. Musk’s personal fortune has already grown substantially in the years since the package was first approved; the court’s decision noted that the reinstated plan would add to his present fortune, which the ruling estimated at about $679 billion.

Tesla has not immediately commented on the ruling. The decision’s broader implications extend beyond Musk’s wealth to debates about board independence, compensation incentives for top executives, and how quickly high-growth companies should connect pay with long-term performance. Analysts have noted that the new, larger plans depend on extraordinary growth in market value, which would require sustained execution and favorable market conditions over an extended period.

As the legal saga resolves, investors will be watching how the reinstatement of the 2018 package and the approval of the newer, higher-stakes plan influence Tesla’s capital strategy, governance norms, and the relationship between a company and its most influential leader. The case also serves as a notable precedent in corporate governance for boards navigating the line between incentive-driven compensation and shareholder fiduciary duties in a rapidly changing technological industry.