Delaware Supreme Court Set to Hear Elon Musk Compensation Case

The Delaware Supreme Court is scheduled to hear arguments on Wednesday, October 15, 2025, regarding Elon Musk's rescinded $56 billion compensation package from Tesla. The appeal follows two rulings by the Delaware Court of Chancery that invalidated the 2018 pay deal

Case background

• The compensation package: Approved by Tesla shareholders in 2018, the 10-year, performance-based compensation plan for Musk was valued at about $56 billion at the time. It would grant Musk stock options for meeting escalating market capitalization and operational milestones.
• Initial lawsuit: In 2018, shareholder Richard Tornetta filed a lawsuit claiming the pay package was excessive and that Musk's undue influence over Tesla's board compromised negotiations.
• Chancellor's rulings: In January 2024, Court of Chancery Chancellor Kathaleen McCormick sided with the plaintiff, ruling that Musk "engineered the landmark pay package in sham negotiations" and that the deal was unfair to shareholders. The judge ordered the package be rescinded. In December 2024, McCormick rejected Tesla's request to reconsider her ruling after shareholders had voted to re-approve the package in June 2024, stating that the retroactive vote did not cure the original flaws.
• Appeal to the Supreme Court: Tesla and Musk appealed the Chancery Court's decisions to the state's highest court in early 2025. They argue that McCormick wrongly applied a strict legal standard, known as "entire fairness," and that the shareholders' re-approval should be honored. 

Key arguments on appeal

• Tesla and Musk's arguments: Their legal team asserts that the compensation was fair and the shareholders' subsequent ratification vote should fix any procedural issues from the original 2018 approval.
• Shareholder's arguments: Lawyers for the plaintiff argue that the Chancery Court correctly applied the "entire fairness" standard and that the post-trial ratification vote is legally invalid.
• Amicus briefs: Numerous third-party groups, including the U.S. Chamber of Commerce and the Texas Association of Business, have filed briefs supporting Musk. They contend that upholding the lower court's ruling could have wide-ranging consequences for corporate governance in Delaware. 

Broader impact
The outcome of the case could have a significant impact on corporate law in Delaware, where most large U.S. companies are incorporated. The dispute has already prompted Musk to reincorporate Tesla and other companies in Texas and Nevada. In response, Delaware lawmakers have proposed new legislation to address some of the corporate governance issues raised by the case and retain the state's status as a top corporate domicile.