Elon Musk’s 2018 Tesla Pay Deal Is Restored by Delaware Supreme Court

A state judge had invalidated the package, saying shareholders were not properly informed about it. Friday’s ruling cleared the plan, now worth $139 billion.

Elon Musk secured a major victory on Friday when the Delaware Supreme Court reinstated his 2018 pay plan at Tesla, now worth $139 billion.

It was Mr. Musk’s second significant financial win at the carmaker in two months. He will get to keep the Tesla stock options he earned for managing the company over the past several years, while remaining eligible for a new package that could make him the world’s first trillionaire.

The 2018 package was struck down last year by a Delaware Court of Chancery judge, who ruled that shareholders had not been properly informed about the plan and that Tesla’s board had not acted independently of Mr. Musk when making the award. The judge said Mr. Musk had effectively overseen his own compensation plan.

Tesla and Mr. Musk appealed that ruling, arguing that Delaware courts should honor a subsequent vote by shareholders that reaffirmed the package.

In its unanimous decision on Friday, the five-member Delaware Supreme Court wrote that “although the justices have varying views on the liability determination, we agree that rescission was an improper remedy.”

The justices wrote that the rescission of the pay package needed to restore Mr. Musk’s financial standing at Tesla to what it was before 2018. But the rescission was improper, they wrote, because it meant that Mr. Musk ended up uncompensated for being chief executive for six years.

Mr. Musk and a representative of Tesla’s board did not immediately respond to requests for comment.

Greg Varallo, a lawyer for the plaintiff, a Tesla shareholder, said his team was considering next steps and was proud to have participated in “calling to account the Tesla board and its largest stockholder for their breaches of fiduciary duty.”

Thanks to his stake in Tesla, which has a market value of $1.5 trillion, as well as a number of other ventures, Mr. Musk is the world’s richest person, according to the Bloomberg Billionaires Index.

Tesla moved its corporate domicile to Texas from Delaware in 2024, after polling users on Mr. Musk’s social media platform, X. His rocket company, SpaceX, and X are also now incorporated in Texas. Though Delaware has long been a popular destination for incorporations because of its court system, in which judges specialize in corporate law, some companies see states like Texas and Florida as more sympathetic to their interests.

For Mr. Musk to obtain the 2018 award, Tesla had to achieve financial and operational goals that were considered demanding at the time. He met those milestones, which included increasing the company’s market value to $650 billion. The package became a model for other chief executives, and added fuel to the debate over whether corporate chieftains are overpaid.

The judge who struck down the 2018 package wrote in her opinion that the stock Mr. Musk already held “provided him tens of billions of dollars for his efforts.”

Last month, Tesla shareholders endorsed the approach of the 2018 package, approving a new pay plan for Mr. Musk that could be worth almost $1 trillion if the company meets a new series of ambitious goals under his leadership.

To compensate for reinstating Mr. Musk’s 2018 pay plan, the court on Friday offered the plaintiff who challenged it a new award: $1.

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