US Court Clears Path for Musk’s $56bn Tesla Pay Package

A Delaware appeals court has ruled in favour of Elon Musk, clearing the way for the Tesla chief executive to receive a long-disputed $56 billion compensation package and overturning earlier judgments that had blocked the award.

The decision, delivered on Friday by the Delaware Supreme Court, reverses two rulings by Chancellor Kathaleen McCormick of the state’s Court of Chancery and marks a major legal victory for the world’s richest person.

In its judgment, the five-member appeals panel said McCormick acted improperly when she ordered the complete rescission of Musk’s 2018 pay package, which had been approved by Tesla shareholders but later challenged in court. The panel noted that Musk had fulfilled the performance conditions attached to the award and that both Tesla and its shareholders benefited from his leadership.

“It is undisputed that Musk fully performed under the 2018 grant, and Tesla and its stockholders were rewarded for his work,” the court said.

The compensation plan, once considered the largest in corporate history, was invalidated in January 2024 after a five-day trial. McCormick described the approval process as “deeply flawed,” arguing that Tesla’s board was overly influenced by Musk. She upheld that position again in December 2024 after an initial appeal.

Tesla Shareholders Approve Elon Musk’s Record $1 Trillion Pay Package

The legal battle began after Tesla shareholder Richard Tornetta filed a lawsuit, claiming the pay package was excessive despite being approved by a majority of shareholders.

Tesla’s board, however, has consistently backed Musk throughout the dispute. In August, it approved an interim compensation award valued at about $29 billion, before unveiling a new pay package that could be worth up to $1 trillion, depending on performance and valuation targets. Tesla shareholders overwhelmingly approved the latest deal in November.

Lawyers representing Tesla shareholders said in a statement on Friday that they are reviewing the ruling and considering their next steps.

The decision is expected to have far-reaching implications for executive compensation and corporate governance in the United States.