Delaware court reinstates Elon Musk’s $56bn Tesla pay deal

Elon Musk’s controversial $56bn pay package from Tesla has been reinstated by the Delaware supreme court, two years after a lower court struck it down as “unfathomable”.

The ruling, delivered on Friday, revives a compensation deal that could now be worth as much as $139bn, according to the New York Times. The decision comes less than two months after Tesla shareholders approved a fresh long-term pay plan that could be worth up to $1tn to Musk over the next decade.

Musk, already the world’s richest person, is estimated to have a personal fortune of about $600bn.

In its judgment, the court said cancelling the pay deal entirely would be “inequitable” and would leave Musk “uncompensated for his time and efforts over a period of six years”. The justices echoed arguments made earlier this year by Tesla’s board.

At Tesla’s annual meeting in Austin, Texas, in November, shareholders approved a stopgap measure guaranteeing Musk the $56bn payout regardless of the outcome of the court appeal.

Tesla did not immediately respond to requests for comment or for further details on the ruling.

Both the reinstated package and other shareholder-approved compensation plans require Musk to meet ambitious targets tied to product development and boosting Tesla’s valuation to $8.5tn before he can fully cash out.

The legal challenge to the original 2018 pay package was brought seven years ago by a Tesla shareholder who owned just nine shares at the time. The suit argued that the plan excessively rewarded Musk, leading a lower court to void the deal.

That ruling prompted a furious response from Musk. He moved Tesla’s incorporation from Delaware to Texas and publicly criticised the state’s legal system, including the court of chancery and its chief judge, Chancellor Kathaleen McCormick.

In February 2024, Musk wrote on X that McCormick had “done more to damage Delaware than any judge in modern history”.

Tesla shareholders were asked again in 2024 to approve the 2018 pay package. They voted in favour, but McCormick struck it down once more, ruling that Musk had exercised undue influence over the process and that shareholders had not been properly informed.

Musk continued to voice his anger, warning that lawyers who still recommend incorporation in Delaware “should be sued for malpractice”.

In Friday’s opinion, the supreme court agreed with McCormick that there had been a breach of fiduciary duty in how the original pay package was developed and presented. The judges ordered nominal damages of $1 to be paid to the plaintiff.

However, the court concluded that voiding the entire compensation package was not justified.

Despite Musk’s calls for companies to abandon Delaware, which remains the legal home of more than 60% of Fortune 500 firms, only a small number have actually left. Those include Dropbox and Coinbase, while others, such as Meta, have so far only threatened to do so.

Read more news on http://www.newdailyprime.news