A Delaware appeals court on Friday removed a major legal barrier preventing Elon Musk from receiving a highly disputed $56 billion compensation package from Tesla, overturning an earlier ruling in the long-running case.
The judgment delivered by the Delaware Supreme Court set aside two earlier decisions by Chancellor Kathaleen McCormick of the Court of Chancery, effectively reviving the compensation plan and clearing the way for the world’s wealthiest individual to secure another massive payout.
In two separate rulings issued in 2024, McCormick had nullified the 2018 compensation agreement, which was once considered unprecedented in size before being surpassed by a newer Tesla pay arrangement awarded to the tech billionaire.
However, a five-member panel of the Supreme Court concluded that McCormick erred in ordering a full rescission of the package, meaning its complete cancellation.
“It is undisputed that Musk fully performed under the 2018 grant, and Tesla and its stockholders were rewarded for his work,” the court stated as it overturned the earlier decision.
Although the 2018 package had received approval from a majority of Tesla shareholders, it was later challenged in court by shareholder Richard Tornetta, who argued that the compensation was excessive.
Reacting to the ruling, lawyers representing Tesla shareholders said in an online statement on Friday that they were reviewing their options and considering what steps to take next.
The package had initially been struck down in January 2024 after a five-day trial, with McCormick describing the approval process as “deeply flawed.” She argued that Tesla’s board had been susceptible to influence from Musk, whom she described as the paradigmatic “Superstar CEO,” and she reaffirmed her position in December 2024 following an appeal.
Throughout the legal battle, Tesla’s board has remained firmly aligned with Musk. In August, the board approved an interim compensation package estimated at around $29 billion and later unveiled a new plan that could ultimately be valued at as much as $1 trillion.
On November 6, Tesla shareholders overwhelmingly endorsed the latest compensation package, which is linked to specific performance milestones and valuation benchmarks for the electric vehicle maker.
What you should know
Elon Musk’s compensation from Tesla has been one of the most controversial executive pay arrangements in corporate history.
The $56 billion package, originally approved in 2018, was tied to ambitious performance targets that Tesla later met, dramatically boosting its valuation. Legal challenges focused on whether Tesla’s board was sufficiently independent and whether shareholders were fully informed.
The latest ruling underscores the power of shareholder approval and executive influence in corporate governance, while also highlighting the limits of judicial intervention in boardroom decisions when performance benchmarks are met.
