Elon Musk listens as reporters ask U.S. President Donald Trump and South Africa President Cyril Ramaphosa questions during a press availability in the Oval Office at the White House on May 21, 2025 in Washington, DC.
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Elon Musk’s lawyers will urge the Delaware Supreme Court on Wednesday to restore his $56 billion pay package fromTesla, as one of the biggest corporate legal battles enters its final stage nearly two years after a lower court judge rescinded theTeslaCEO’s record compensation.
The outcome could have substantial consequences for the state of Delaware, its widely used corporate law, and its Court of Chancery, a once-favored venue for business disputes that has recently been accused of hostility towards powerful entrepreneurs.
The January 2024 Court of Chancery ruling striking downMusk’s pay has become a rallying cry for Delaware critics. Chancellor Kathaleen McCormick ruled that theTeslaboard lacked independence from Musk when it approved the pay package in 2018 and that shareholders lacked key information when they voted overwhelmingly in favor of it. As a result, she applied a demanding legal standard and found the pay unfair to investors.
The defendants, current and formerTesladirectors, denied wrongdoing and said McCormick misinterpreted the facts and the law. Musk is not expected to attend.
Companies switch legal homes
After the Musk pay ruling, large companies, includingTesla, Dropbox, and the venture capital firm Andreessen Horowitz,switchedtheir legal homes to Texas or Nevada, where courts are friendlier toward directors. Delaware lawmakers responded to the corporate departures, a trend known as “Dexit,” byoverhaulingits corporate law.
If Musk loses the appeal, he will still reap tens of billions of dollars in stock from the electric vehicle company, whichagreedin August to a replacement deal if his 2018 plan is not restored.
The company said the replacement award was meant to retain and focus Musk, who said earlier this year he was forming a new U.S. political party, on transitioningTeslato robotics and automated driving.Teslais now incorporated in Texas, where it is far more difficult for a shareholder to challenge board decisions.
Tesla’s board last month proposed a$1 trillioncompensation plan, highlighting confidence in Musk’s ability to steer the company in a new direction, even asTeslaloses ground to Chinese rivals in key markets amid softening EV demand.
The five justices on Delaware’s high court will consider the appeal of the pay ruling as well as the $345 million legal fee that McCormick orderedTeslato pay to the attorneys forRichard Tornetta, who held just nineTeslashares when he sued to block the pay deal. The court typically takes months to rule.
Teslaestimated in 2018 the stock options plan would be worth $56 billion if the company met operational and financial goals, which it did. Because the stock continued to appreciate, the options are currently worth closer to $120 billion, by far the largest executive compensation ever. Musk is the world’s richest person with a fortune of around $480 billion, according to Forbes.
The defendants have argued that McCormick erred in finding social and business ties to Musk compromised their independence and saidTeslashareholders were informed of the economic terms of the pay deal before they approved the plan. The directors said she should have reviewed the pay package under the “business judgment” standard, which protects directors from second-guessing by courts.
The directors have long argued the pay package performed as hoped – it focused the attention of Musk, a serial entrepreneur, and he transformedTeslafrom a startup into one of the world’s most valuable companies.
Several months after McCormick’s ruling,Teslareceived shareholder approval asecond timefor the plan, which McCormick rejected aslegally invalid.Teslais also appealing that decision.
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