WILMINGTON, Del. (Diya TV) — The Delaware Supreme Court has ordered the restoration of Elon Musk’s landmark 2018 CEO pay package from Tesla, ending one of the most closely watched corporate governance battles in recent U.S. history. The ruling reverses a lower court decision that had wiped out the compensation plan, which was valued at about $56 billion when it vested.
The court’s decision, issued Friday, hands a major legal win to Tesla and Musk. It also closes a yearslong shareholder lawsuit that challenged the fairness and approval process behind Musk’s record-setting pay. In a brief per curiam opinion, the Delaware Supreme Court said the Court of Chancery went too far when it rescinded Musk’s 2018 compensation package. The justices ruled that canceling the plan was an extreme remedy.
“We reverse the Court of Chancery’s rescission remedy and award $1 in nominal damages,” the judges wrote.
The court said the lower court did not give Tesla the chance to propose what a fair compensation package for Musk should look like. That failure, the justices said, undermined the decision to void the entire pay plan. The ruling likely ends the case known as Tornetta v. Musk, which has shaped debate around executive pay, shareholder rights, and board oversight.
Tesla approved Musk’s 2018 CEO pay package as a performance-based plan tied to aggressive milestones. The package included 12 tranches of stock options. Each tranche required Tesla to hit targets for market value, revenue, and earnings. At the time, the plan was unprecedented in size and structure. Once it vested, it made Musk the wealthiest person in the world.
In 2018, Tesla shareholder Richard J. Tornetta sued the company in Delaware’s Court of Chancery. He claimed Musk and Tesla’s board breached their fiduciary duties. Tornetta argued the board failed to act independently and did not properly inform shareholders before asking them to approve the plan.
In January 2024, Chancellor Kathaleen McCormick ruled in favor of Tornetta. She found that Musk “controlled Tesla” and dominated the compensation process. She also said the board’s approval process was “deeply flawed.” McCormick ruled that Tesla did not disclose all material facts to shareholders before the 2018 vote. Based on those findings, she ordered the pay plan rescinded.
That decision sparked backlash from Musk. He criticized the ruling publicly and attacked McCormick by name on X, formerly Twitter. Musk later moved Tesla’s incorporation out of Delaware and urged other companies to do the same.
Legal experts say the Supreme Court ruling restores the pay package but leaves much of the lower court’s reasoning untouched. Dorothy Lund, a professor at Columbia Law School, told CNBC that the justices did not overturn the findings about control or board conduct.
“The court had previously decided that Musk was a controlling shareholder of Tesla and that the Tesla board and he arranged an unfair pay plan for him,” Lund said. “None of that was reversed in this decision.”
Lawyers for Tornetta echoed that view. They said the original ruling still holds Tesla’s board accountable for fiduciary failures.
After the Chancery Court ruling, Tesla sought to protect Musk’s compensation. The company held a second shareholder vote in 2024 to ratify the 2018 pay package. Tesla shareholders also approved a separate backup plan. That plan would have replaced Musk’s 2018 compensation if the appeal failed. The Supreme Court ruling now makes that replacement plan void.
In November, shareholders approved an even larger CEO pay package for Musk. The 2025 plan includes 12 new tranches of stock tied to long-term performance goals. It could be worth about $1 trillion over the next decade.
The new plan could also raise Musk’s voting power at Tesla from about 13% to roughly 25%.
The case has had ripple effects beyond Tesla. A law firm representing Tesla in the appeal helped draft a bill to overhaul Delaware corporate law earlier this year. The Delaware legislature passed the bill in March. The new law did not apply retroactively. If it had, it could have changed the outcome of the case.
Musk’s net worth now stands at an estimated $679.4 billion, according to Forbes’ real-time billionaire rankings. Tesla did not immediately comment on the Supreme Court decision.
