Elon Musk Wins as Delaware Top Court Restores Tesla Compensation Deal
Delaware Supreme Court reinstates Musk's massive 2018 Tesla compensation.
After a protracted seven-year legal battle, the Delaware Supreme Court unanimously reinstated Elon Musk's groundbreaking 2018 compensation package for leading Tesla Inc., overturning a lower court decision that had previously voided the entire payout. The ruling, issued on December 20, 2024, emphasized that completely rescinding the plan would unjustly deprive Musk of rewards for his undisputed performance, during which Tesla achieved extraordinary growth and shareholder value.
The 2018 package, structured as performance-based stock options, has ballooned to approximately $140 billion in value amid Tesla's stock surge from around $20 to nearly $500 per share. Tied to ambitious milestones that Musk fully met, the plan was initially challenged by a single shareholder, Richard Tornetta, who argued that Tesla's board had conflicts of interest due to close ties with Musk, the company's largest stakeholder.
In January 2024, Delaware Chancery Court Judge Kathaleen St. J. McCormick sided with the plaintiff, canceling the package and awarding over $290 million in legal fees. This decision sparked outrage from Musk, who criticized Delaware's judiciary as anti-business and spearheaded a corporate exodus, relocating Tesla's incorporation to Texas along with his other ventures. Tesla shareholders twice voted overwhelmingly to support the plan, underscoring broad investor backing.
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The Supreme Court's 49-page opinion acknowledged board conflicts but deemed total rescission an improper remedy, awarding Tornetta only nominal $1 damages and capping legal fees at $54.5 million. The court noted that Musk's efforts from 2018 to 2024 transformed Tesla into one of the world's most valuable companies, benefiting stockholders immensely, and no alternative compensation remedy had been proposed.
This outcome reinforces scrutiny on corporate governance while highlighting Delaware's efforts to retain businesses through recent legal reforms. Musk, responding on X, stated he finishes fights he engages in, as the reinstated package complements a newer 2024 shareholder-approved plan potentially worth trillions more in future incentives.
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