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The Delaware Supreme Court rules in favour of Musk and his $56bn compensation package.
Elon Musk’s 2018 pay package from Tesla, once worth $56bn, has been restored by the Delaware Supreme Court, in the United States, two years after a lower court struck down the compensation deal as “unfathomable”.
Friday’s ruling overturns a decision that had prompted a furious backlash from Musk and damaged Delaware’s business-friendly reputation.
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The pay package was by far the largest ever, until Tesla shareholders approved a new, even larger pay plan of nearly $1 trillion in November.
The ruling means that Musk can finally get paid for his work since 2018, when he transformed Tesla from a struggling startup to one of the world’s most valuable companies.
The 2018 pay deal provided Musk options to acquire about 304 million Tesla shares at a deeply discounted price if the company hit various milestones, which it did.
Tesla estimated in 2018 that the plan was potentially worth $56bn, although given the rise in the stock price, the value ballooned to about $120bn by early November. The options represent approximately 9 percent of Tesla’s outstanding stock.
Musk never collected his stock options because, soon after shareholders approved the 2018 compensation, the board was sued by Richard Tornetta, an investor with just nine Tesla shares.
In 2024, after a five-day trial, Delaware Judge Kathaleen McCormick concluded that Tesla’s directors were conflicted and key facts were hidden from shareholders when they voted to approve the plan. She ordered that the 2018 plan be rescinded.
Musk accused Delaware judges of being activists, hostile to tech founders, and he urged businesses to follow Tesla and reincorporate elsewhere.
Dropbox, Roblox, The Trade Desk and Coinbase were among the handful of large companies that moved their legal homes to Nevada or Texas. However, Delaware remains by far the most popular legal home for US public companies.
Tesla’s board has warned that Musk, the world’s richest person who also leads the SpaceX rocket venture and the artificial intelligence startup xAI, could leave the electric car company if he does not get the pay he wants and an increase in his voting power.
In November, shareholders approved a new pay package that could be worth $878bn if Tesla meets targets for self-driving vehicles, a robotaxi network and sales of humanoid robots.
Tesla has taken steps to reduce the risk that a shareholder could tie up the 2025 package in the courts.
The Austin-based company is now incorporated in Texas, which allows Tesla to require that any investor or group of investors must own 3 percent of the company stock before suing for an alleged corporate law violation. A stake of that size would be worth about $30bn, and Musk is the only individual with that much stock.
