Delaware Supreme Court Reinstates Elon Musk’s $50 Billion Tesla Pay Package
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The Delaware Supreme Court has overturned a lower court ruling that had rescinded Elon Musk’s controversial 2018 compensation package, restoring the massive payout to the Tesla CEO. The decision, issued on December 19, 2025, marks a significant victory for Musk and Tesla, reversing a judgment that sparked a public dispute between the executive and the state of Delaware.
A Contentious History
The legal battle stemmed from a challenge to Musk’s 2018 pay package, valued at over $50 billion, which granted him stock options contingent on Tesla achieving ambitious growth targets. While Tesla ultimately met those goals, a judge in the Delaware Court of Chancery ruled that the plan was flawed, alleging a lack of full disclosure to shareholders and undue influence from Musk over board members. This initial ruling ignited a public feud, with Musk threatening to move Tesla’s legal domicile away from Delaware, a state historically favored for its business-friendly courts.
Supreme Court Ruling: A Unanimous Decision
In a unanimous 50-page opinion, the Delaware Supreme Court reversed the Court of Chancery’s decision to rescind the 2018 compensation plan. The court awarded “nominal damages” to the plaintiffs and stipulated that legal fees would be covered based on quantum meruit and expenses. “We reverse the remedy chosen by the Court of Chancery — rescission of the 2018 compensation plan,” the court stated.
The initial Chancery Court ruling had prompted Tesla to seek a shareholder vote to ratify a similar pay package, which shareholders subsequently approved. However, the judge rejected this ratification, leading Tesla to appeal to the state’s highest court.
Arguments Before the Court
Attorneys representing Tesla and Musk argued that the original ruling by Chancellor Kathaleen McCormick overstated Musk’s influence as CEO and that shareholders were adequately informed about the plan. They also contended that the subsequent shareholder vote represented a valid remedy, with one attorney describing it as “the most informed shareholder vote in Delaware history.” They further argued that rescinding the package was legally inappropriate, given Tesla’s substantial growth since its inception.
According to the defense, attempting to return both parties to their original positions was impossible; Tesla had grown 14-fold, and Musk’s contributions were irreversible. A “nominal” damages award, they argued, was the only appropriate outcome.
The plaintiffs’ counsel countered that McCormick’s ruling was grounded in established legal precedent and that the case was exceptional due to the sheer scale of the compensation package – the largest in history, awarded to the world’s richest individual.
Legal Fees Under Scrutiny
The court also addressed a challenge to the $345 million in legal fees awarded to the attorneys who brought the case. This figure was partially based on the value of Musk’s contested compensation, which has increased from an estimated $56 billion in 2018 to approximately $120 billion, according to Reuters. .
Implications for Delaware’s Business Court
While only a limited number of billion-dollar companies have relocated from Delaware in response to Musk’s campaign, the dispute has significantly impacted public discourse and prompted discussions about the state’s role as a leading business court. The outcome of this case will likely be closely watched by corporations and legal experts alike, potentially influencing future decisions regarding corporate governance and executive compensation.
