Elon Musk’s lawyers will make their final defense on Wednesday in the Delaware Supreme Court for the re-approval of the $56 billion settlement package at Tesla. This case has entered its final stage as one of the largest corporate legal battles in history.
In January 2024, the Delaware Chancellor’s Court canceled Musk’s settlement plan, which was approved in 2018. Judge Kathaleen McCormick stated that the Tesla board of directors did not act independently of Musk and that shareholders were not fully informed during the voting, characterizing the plan as an “unfair” deal for investors. This decision undermined Delaware’s image as an attractive jurisdiction for companies, prompting many giant corporations—including Tesla, Dropbox, and Andreessen Horowitz—to move their headquarters to Texas or Nevada. This wave was dubbed “Dexit.” Even if Musk loses the case, under the terms of the contingency agreement with Tesla… He will earn tens of billions of dollars worth of shares. The company explained that this plan was designed to keep Musk focused on Tesla’s robotics and autonomous driving goals. Tesla is now registered in Texas, where it is much harder to file shareholder lawsuits.
Tesla management proposed a new $1 trillion compensation plan last month to demonstrate its confidence in Musk’s leadership. However, this move comes at a time when the company is losing market share to its Chinese competitors.
A five-judge panel of the Delaware Supreme Court will review both the decision regarding Musk’s compensation plan and the $345 million legal fee claim paid to Richard Tornetta’s lawyers. The decision may take several months to be announced.
In 2018, the plan was valued at $56 billion, but with the increase in Tesla’s stock value, that figure has now reached approximately $120 billion — making it the largest executive compensation in history.
According to Forbes, Musk’s fortune is around $480 billion. Tesla management argues that this payment plan transformed the company from a start-up into a global giant. However, the court will decide whether this claim falls under the “business decision” standard or requires stricter scrutiny. Tesla management argues that this payment plan transformed the company from a start-up into a global giant. However, the court will decide whether this claim should be evaluated under the “business decision” standard or subjected to stricter scrutiny.
