On Wednesday, the Delaware Supreme Court will hear the latest set of arguments in a yearslong legal drama over Tesla CEO Elon Musk's record-setting compensation package.
The pay package, worth tens of billions of dollars, was laid out back in 2018. It didn't give Musk a salary, but instead, promised him more and more Tesla shares the better the company did. The goals laid out for the highest awards — which called for Tesla's value to grow tenfold — seemed somewhere between audacious and utterly impossible at the time. Back then, the board told shareholders Musk could stand to gain $55.8 billion if he met all the goals.
The company grew incredibly quickly, and Tesla says that Musk unlocked the full suite of shares in 2022.
The exact value of the pay package depends on when and how you count; Tesla's share price is volatile. But as of mid-October 2025, with Tesla stock at $429.24, the pay package could hypothetically be worth well over $100 billion. Even if Musk only realizes a fraction of that value, it's still the biggest payday ever offered to the CEO of a publicly traded company.
Or at least it would be, if Musk actually receives it. The long-running lawsuit over the compensation package will head back to court today.
What is the basis of the lawsuit?
In 2018, a Tesla shareholder named Richard Tornetta filed a suit against Musk, Tesla and Tesla's board of directors accusing members of the board of violating their legal obligation, called a fiduciary duty, to act in the best interests of shareholders and the company overall. Tornetta argued that Musk had too much influence over the board and, in turn, too much influence over how much money he stood to make. (Musk's brother, who serves on the board, recused himself from the pay decision, but some other members of the boards are close friends of Musk's.)
The lawsuit also argued that shareholders had not been adequately informed when they voted to approve the pay package, because they did not know about the board members' personal ties to Musk and the amount of influence Musk had over the pay proposal.
Tornetta brought his suit in Delaware's Court of Chancery, which adjudicates disputes within businesses. At that time, Tesla was incorporated in Delaware, like the majority of large U.S. corporations.
In court, lawyers for Tesla have repeatedly emphasized that shareholders voted in favor of the pay package, with full disclosure of the eye-popping financial terms of the deal.
The board has also emphasized that the pay was tied to performance. Tesla stock performed extraordinarily well under Musk, so Musk earned his extraordinary payday, they say.
"Against all odds and with many betting against him, Musk grew Tesla's value by roughly 1400%, with stockholders keeping more than 90% of that explosive growth," Tesla's lawyers wrote in one legal filing. That was the direct result of a pay package that only rewarded Musk if the company achieved such ambitious growth, they argued.
Some Tesla shareholders have filed briefs supporting Tesla's position, arguing that they felt fully informed when they voted for the pay package.
What did the lower court decide?
Delaware's Chancery Court ruled with Tornetta. The "unfathomable sum" that Musk was given was excessive, Judge Kathaleen McCormick found, and she directed Tesla to come up with a new compensation package to replace it.
Instead, Tesla put the exact same compensation package up for a second vote by shareholders in 2024. They passed it once again. McCormick rejected that vote as well, saying that putting the same plan up for a second vote was not the same as developing a new plan.
This March, Musk and the board appealed her decision to Delaware's State Supreme Court.
What are the key questions now before the court?
A panel of justices will now weigh whether the pay package was an extraordinary move reflecting undue influence or inadequately informed shareholders — or a properly conducted business decision. If it's the latter, then in general, the courts defer to corporate boards and shareholders.
If the pay package did merit extra scrutiny, the justices may evaluate whether it was exorbitant because it was wildly out of proportion to how much other CEOs make — or if it was fair, perhaps because that unusually high pay was tied to unusually ambitious targets.
And they may consider whether Tesla's second vote in 2024 makes up for anything improper that may have happened in 2018.
What's the status of Elon Musk's pay now?
Even without the 2018 pay package, Musk's large stake in Tesla has allowed him to personally profit off the skyrocketing value of Tesla shares. He currently owns about 13% of the electric car company and recently bought another billion dollars' worth of shares.
This summer, Tesla's board voted to give Musk another $29 billion worth of shares as an "interim" compensation package. That is explicitly framed as an alternative to the much larger package that is at the heart of this court battle: Musk will get either the 2018 package, if it's fully reinstated, or that "interim" stock package, but not both.
Meanwhile, Tesla's board of directors have proposed a new, future compensation package for Musk that, if it is fully realized, could make him the world's first trillionaire. (To put that astonishing possibility in perspective: If you earned a dollar every second, you'd be a millionaire in less than 12 days, a billionaire in around 32 years, and a trillionaire in 32,000 years.)
Like the 2018 package, this one consists exclusively of stock options and is tied to hitting certain targets. This time, the targets include the number of subscribers to the company's "Full Self-Driving (Supervised)" software, the number of robotaxis in operation and the company's financial performance. Reuters recently analyzed the package and found that Musk could earn billions of dollars even without meeting signature goals, like delivering a fully driverless Tesla.
Shareholders will get to vote on this new compensation package at the annual meeting on Nov. 6.
What has been the fallout from this lawsuit?
Delaware's business-friendly corporate law makes it popular with big companies; more than two-thirds of the Fortune 500 are incorporated in the small state.
Immediately after the first decision that voided his compensation package, Musk began posting on social media about moving Tesla's incorporation to Texas. After a shareholder vote in June 2024, Tesla's legal home shifted from Delaware to Texas The company had previously relocated its physical headquarters there from California.
The phenomenon of companies shifting their legal home out of Delaware has become common enough to get its own shorthand: "Dexit."
"There have been a string of decisions in Delaware Chancery Court that have begun to shake the faith of the corporate folks who are incorporated there in Delaware," Beth I.Z. Boland, a partner with Foley and Lardner, said in a recent webinar. The Tornetta case wasn't the only controversial decision that concerned corporate leaders, she said, but it was a high-profile example.
The Delaware legislature, alarmed by the "Dexit" trend, has stepped in with new laws designed to protect its business-friendly reputation, including one passed earlier this year that would make it harder to file lawsuits like Tornetta's.
As Spotlight Delaware notes, the Delaware Supreme Court will hear a challenge to the constitutionality of that law on Nov. 5, just a few weeks after hearing arguments in the compensation case that inspired it.
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