Delaware Supreme Court Restores Elon Musk’s 2018 Tesla Compensation Package

2025-12-19 companies

Dover, Saturday, 20 December 2025.
Ruling that total cancellation was inequitable, the court reinstated Musk’s 2018 awards—now valued at nearly $140 billion—while granting the suing shareholder only $1 in damages.

A Historic Reversal

In a decisive ruling issued on Friday, December 19, the Delaware Supreme Court overturned a lower court’s decision, effectively reinstating Tesla CEO Elon Musk’s 2018 compensation package [1][2]. The judgment concludes a contentious years-long legal battle that began when shareholder Richard Tornetta challenged the board’s independence and the fairness of the award [3][4]. While the compensation plan was originally valued at approximately $56 billion, the subsequent appreciation of Tesla’s stock has ballooned the package’s current worth to roughly $140 billion [1].

Proportionality in Corporate Law

Despite reinstating the pay package, the Supreme Court did not entirely absolve Tesla’s board of wrongdoing. The court agreed with Chancellor Kathaleen McCormick’s earlier findings that there was a breach of fiduciary duty in how the package was developed and approved [5][6]. Specifically, the lower court had found that Musk “controlled Tesla” and that the approval process was “deeply flawed” [6]. However, the Supreme Court determined that total cancellation of the award was too extreme a remedy for these procedural failures [3][6].

A Windfall Restored

The financial implications of this ruling are staggering, reflecting the immense growth of Tesla over the vesting period. The 2018 compensation plan consists of 12 tranches of stock options that vest upon the achievement of specific operational and market-capitalization milestones [6][7]. These awards comprise over 300 million options with an exercise price near $23 per share [7]. With the package restored, the value has surged from its initial $56 billion valuation to approximately $140 billion today, representing an increase of 150% [1][4]. However, exercising these options will require substantial financing and could result in a share dilution of nearly 10% [7].

Strategic Fallout and Future Plans

This legal saga has already reshaped Tesla’s corporate structure. Following the initial rejection of the pay package by the Chancery Court in early 2024, Musk campaigned to move Tesla’s incorporation from Delaware to Texas, a strategic pivot driven by his dissatisfaction with the Delaware legal system [3][4]. Shareholders subsequently ratified the 2018 package in a 2024 vote, signaling continued support for the CEO despite the governance concerns raised in court [4][7].

Sources

Corporate Governance Executive Compensation