Updated Dec. 19, 2025, 5:48 p.m. ET
The Delaware Supreme Court has reversed part of a lower court’s decision that sent the world’s richest man into a simmering social media tantrum against the First State when his compensation package was struck down.
But now the state Supreme Court says Elon Musk‘s 2018 pay package, worth more than $50 billion, is to be restored.
In October, attorneys representing Tesla and Musk, its CEO, argued to the state Supreme Court that it should overturn a Chancery Court ruling rescinding Musk’s $50 billion pay package after a judge ruled the pay plan derived from a process that didn’t fully inform shareholders and was shaped by board members beholden to Musk.
“We reverse the remedy chosen by the Court of Chancery — rescission of the 2018 compensation plan,” the court unanimously said in a 50-page opinion issued in the late afternoon on Dec. 19. “We reinstate the 2018 plan and award the Plaintiff nominal damages. We also award the Plaintiff’s counsel fees based on quantum meruit and expenses.”
Chancery Court’s ruling sent Musk into a campaign to relocate the legal home of his own companies from Delaware and encourage other companies to do the same by verbally lashing the state’s famed business court online.
It’s a challenge that has in subsequent years seen only a handful of billion-dollar companies decamp from Delaware, but more prominently shaped public discourse and state law regarding the state’s lucrative status as the top place to domicile a business.
How we got here
Musk’s appeal attacked the 2023 Chancery Court ruling by Chancellor Kathaleen McCormick, the top judge on Delaware’s business court, regarding a 2018 pay plan that granted Musk company stock if it met targets centered on the growth under his leadership. Tesla met those massive growth goals, but the pay package was challenged in court.
After years of litigation involving company emails and other evidence, McCormick ruled the plan was produced by a corrupted process and that key information was withheld from shareholders. In finding the breach of fiduciary duty, McCormick applied a stringent legal standard that was attacked upon appeal.
McCormick’s ruling essentially invalidated Musk’s payment plan, however, in response, Tesla called for another shareholder vote after to ratify essentially the same pay package. Shareholders approved that plan, but McCormick rejected it, ruling it wasn’t a viable response to her ruling.
Attorneys for the company appealed these rulings to the Supreme Court.
What they argued
Attorneys for the company and Musk asked Delaware’s top court to overturn either the original ruling invalidating the pay plan or McCormick’s rejection of the subsequent shareholder vote.
They argued that McCormick’s ruling overstated or mischaracterized Musk’s influence over the process as a “superstar CEO” and that shareholders were properly informed of the plan’s aspects ahead of its first approval.
They argued that the second shareholder vote was a proper remedy to approve the pay plan given the litigation and business growth that preceded it. Jeffrey Wall, an attorney for Tesla, told the court it was the “most informed shareholder vote in Delaware history.”
Wall said that’s the case even without setting aside the alleged fiduciary breaches central to McCormick’s ruling.
“We are not saying shareholders cleansed the breach, only that they accepted the result of the transaction,” Wall told the court.
They also argued that McCormick’s remedy, rescinding the pay package, was legally incorrect.
They argued there is no such remedy that returns both parties to their position before the transaction at question. Tesla has grown 14-fold and Musk can’t get back the time invested in contributing to that, the attorneys said, arguing that a “nominal” damages award is all that’s potentially appropriate given the company’s significant growth.
While most of the questions lodged by the court’s justices were technical and centered on specific legal precedent, Justice Karen Valihura twice asked attorneys if they could cite any legal precedent in which a court has “equitably rescinded” an executive’s compensation after years of work.
Gregory Varallo, the attorney representing the plaintiffs in the suit, argued there was precedent for such and, more generally, McCormick’s ruling wasn’t extraordinary but built on a sound interpretation of the law.
“What makes it truly extraordinary is it addresses the largest pay package in human history, awarded to the richest man on earth, who is also one of the most powerful men on earth,” Varallo said.
Big money
Secondarily, the court also considered a challenge to the $345 million legal fee awarded to the attorneys that brought the case. That was partially based on the worth of Musk’s challenged compensation plan.
In 2018, Tesla estimated the stock options tied to the plan would be worth $56 billion if the company met is financial goals. It did, and the company has continued to grow in value so the options are worth closer to $120 billion, according to Reuters.
Send tips or story ideas to Esteban Parra at (302) 324-2299 or eparra@delawareonline.com.
