Delaware Supreme Court Restores Elon Musk’s 2018 Tesla Pay Package in Groundbreaking Ruling

Hadisur Rahman, JadeTimes Staff

H. Rahman is a Jadetimes news reporter covering Business

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Image Source: Marc Piasecki / Getty Images file

In a landmark decision, the Delaware Supreme Court on Friday reinstated what was once the largest compensation package in corporate history for Elon Musk, restoring a 2018 plan valued at up to $56 billion at its inception and potentially far higher given Tesla’s soaring stock price. The ruling, a reversal of a lower court’s 2024 decision that rescinded the package amid allegations of director conflicts and undisclosed facts, marks a turning point in how executive compensation is litigated and perceived within the state’s business-friendly legal framework.

The 2018 plan granted Musk the right to acquire roughly 304 million Tesla shares at a deeply discounted price if certain milestones were achieved, a structure that proponents argued aligned management incentives with long-term shareholder value. At the time, Tesla was transitioning from a startup to a dominant force in the electric vehicle market, and the board believed the package would attract and retain a visionary leader capable of accelerating the company’s trajectory. By early November, with Tesla’s stock performing exceptionally well, the theoretical value of the options had ballooned to approximately $120 billion, though actual realization would depend on future performance and exercise conditions.

Despite the dramatic upside, Musk did not exercise these options, and a series of legal battles followed. In 2024, Delaware Judge Kathaleen McCormick concluded that Tesla’s directors faced conflicts and that material facts were inadequately disclosed to shareholders, resulting in the plan’s rescission. The latest appellate decision, however, overturns that ruling, reinstating the 2018 package and allowing Musk to pursue potential compensation under the terms originally approved by Tesla’s board and shareholders.

The decision has broader implications for corporate governance and the governance of executive pay. It raises questions about the balance between rewarding leadership and protecting shareholder interests, particularly in blue-chip companies that carry enormous market capitalization and have intensified investor scrutiny over compensation practices. Delaware, home to a substantial portion of U.S. public companies, remains at the center of discussions about how best to structure, disclose, and adjudicate executive compensation amid evolving expectations from investors and regulators.

As Musk continues to lead Tesla’s forays into autonomous driving, robotics, and energy initiatives, the reinstated plan could shape incentives not only for the company’s leadership but also for how boards evaluate governance risks and communicate with shareholders about compensation arrangements in a rapidly changing technology sector.