A Delaware appeals court on Friday, December 19, cleared the way for Elon Musk to receive a long contested $56 billion Tesla pay package, overturning an earlier ruling that had invalidated the award.

 

 

 

The decision by the Delaware Supreme Court rejected two judgments delivered by Chancellor Kathaleen McCormick of the Delaware Court of Chancery and effectively reopened the path for the world’s richest individual to collect the compensation.

 

 

 

 

In rulings delivered in 2024, McCormick had struck down the 2018 pay package, describing the approval process as deeply flawed. She had ordered the rescission of the award despite the fact that it was approved by a majority of Tesla shareholders.

 

 

 

However, the five judge appeals panel ruled that McCormick erred in ordering the package to be voided in its entirety.

 

 

 

 

“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 ruling.

 

 

 

 

The case originated from a lawsuit filed by Tesla shareholder Richard Tornetta, who challenged the compensation as excessive even though it had received shareholder approval.

 

 

 

In January 2024, following a five day trial, the Court of Chancery struck down the award, with McCormick writing that Tesla’s board was vulnerable to manipulation by Musk, whom she described as the paradigmatic superstar chief executive. She reaffirmed that position in December 2024 after an initial appeal.

 

 

 

Tesla’s board has consistently backed Musk throughout the legal battle. In August, directors approved an interim compensation award estimated at about 29 billion dollars and later unveiled a new pay package valued at up to one trillion dollars. On November 6, Tesla shareholders overwhelmingly approved the latest compensation plan, which is tied to a series of performance and valuation targets.

 

 

 

In a statement released online on Friday, lawyers representing Tesla shareholders said they were reviewing the ruling and considering their next steps.