Elon Musk won a major legal victory this week when the Delaware Supreme Court reinstated his long-disputed 2018 pay package from Tesla. The decision overturns a lower court ruling that had struck down the record-setting compensation plan as unfair, ending a years-long courtroom fight over the world’s most controversial executive pay deal.
The original package, approved by shareholders seven years ago, tied Musk’s compensation to ambitious performance milestones. Musk only receives stock-based pay rather than a salary, tying his rewards directly to Tesla’s market value and operational success. At the time it was first approved, the plan was valued at roughly $56 billion. With Tesla’s stock at all-time highs, the reinstated award would be worth about $140 billion based on current share prices, dwarfing virtually any previous pay agreement in corporate history.
Judges on the state’s highest court ruled that rescinding the compensation entirely would leave Musk “uncompensated for his time and efforts over a period of six years,” a remedy they saw as inequitable. The justices concluded that while questions exist about how the board approved the pay plan, stripping Musk of all his stock awards went too far. By restoring the pay package, the court ended the legal uncertainty that had lingered since a Delaware Chancery Court initially threw out the deal in 2024.
The lower court had ruled against the pay deal after a shareholder lawsuit alleged that Tesla’s board lacked sufficient independence when crafting the compensation, suggesting directors were too close to Musk to judge the plan fairly. That case forced Tesla’s leadership to seek new shareholder approval and prompted contentious debate in investor circles over executive pay standards in the electric-vehicle maker’s governance.
In the wake of the earlier ruling, Tesla’s board moved swiftly to protect Musk’s compensation. At the company’s annual meeting last month, shareholders reaffirmed the original award, and also approved a new, even larger pay package that could be worth as much as $1 trillion if Musk meets a long list of performance goals over the next decade. Those milestones extend beyond car sales to include ambitious bets on future technology such as autonomous driving, robotics, and artificial intelligence.
Musk reacted to the court’s decision on social media, describing it as vindication after years of legal wrangling. In response to the earlier court challenges, he had accused Delaware courts of hostility toward business and even moved Tesla’s state of incorporation from Delaware to Texas, a decision aimed at shielding the company from similar legal challenges in the future.
The compensation battle had drawn scrutiny from investors and corporate governance experts, many of whom criticized the size of the award and the board’s handling of the approval process. Opponents argued the extraordinary compensation plan could misalign executive incentives with broader shareholder interests, particularly given the stock-linked structure that places much emphasis on market valuation increases.
Despite those concerns, the Delaware Supreme Court’s ruling underscores the legal weight of shareholder-approved plans and the difficulty courts face in balancing oversight with respect for corporate governance decisions. By choosing to restore the award rather than leave Musk without compensation for years of work, the justices set a precedent for how far judicial review can go in overturning board and shareholder decisions.
As Tesla evolves, this legal chapter highlights the ongoing tension between executive pay, shareholder rights, and corporate law. For now, Musk retains his headline-making compensation and remains at the center of debate over CEO pay structures in the modern tech era.
