A US appeals court in Delaware has cleared the way for Elon Musk to receive a long-contested $56 billion compensation package from Tesla, overturning earlier rulings that had invalidated the historic award and marking a major legal victory for the world’s richest person.
In a decision issued on Friday, the Delaware Supreme Court reversed two judgments by Chancellor Kathaleen McCormick of the state’s Court of Chancery, who had previously struck down the pay deal. The ruling effectively reinstates Musk’s 2018 compensation package and removes a key legal barrier to its payout.
The five-judge panel concluded that the lower court erred in ordering a full rescission of the award, noting that Musk had already fulfilled the performance conditions tied to the compensation.
“It is undisputed that Musk fully performed under the 2018 grant, and Tesla and its stockholders were rewarded for his work,” the court said in its decision.
Background of the dispute
The pay package, approved by Tesla shareholders in 2018, was once considered the largest executive compensation deal in corporate history. It was structured around ambitious market capitalization and operational milestones, which Musk ultimately achieved as Tesla’s valuation soared.
However, the award was challenged in court by Tesla shareholder Richard Tornetta, who argued that the compensation was excessive and that the approval process was flawed. The case went to trial, and in January 2024, Chancellor McCormick invalidated the package after a five-day hearing, describing the process as “deeply flawed.”
In her ruling, McCormick said Tesla’s board had been overly influenced by Musk, whom she described as the “paradigmatic ‘Superstar CEO.’” She later upheld that decision in December 2024 following an appeal.
Friday’s ruling overturns those findings, rejecting the conclusion that the board’s conduct justified canceling the entire compensation award.
Tesla board and shareholder backing
Throughout the legal battle, Tesla’s board has consistently stood by Musk. In August, the board approved an interim compensation award worth about $29 billion, and later unveiled a new long-term pay package that could be worth up to $1 trillion, depending on future performance and valuation targets.
Tesla shareholders overwhelmingly endorsed the latest package on November 6, reinforcing Musk’s strong support base among investors. The new deal, like the earlier one, is tied to aggressive growth benchmarks and market performance goals.
In a statement released after Friday’s ruling, attorneys representing Tesla shareholders said they were reviewing the decision and considering their next steps.
A significant legal and financial milestone
The appeals court ruling not only restores Musk’s right to the $56 billion award but also sets a powerful precedent in corporate governance and executive compensation disputes. It underscores the weight courts may place on shareholder approval and performance-based incentives, even when compensation levels are unprecedented.
For Musk, the decision adds another massive windfall to his fortune and solidifies his influence at Tesla, as the company continues to pursue ambitious goals in electric vehicles, artificial intelligence, and energy innovation.
