The Delaware Supreme Court of the United States has ruled that Tesla’s 2018 compensation package granted to its CEO Elon Musk must be restored. In its opinion, the court wrote that it was overturning the Court of Chancery’s rescission remedy and awarding symbolic damages of just 1 US dollar.

In this ruling, the Delaware Supreme Court held that the lower court’s decision to cancel Musk’s 2018 pay package as a remedy was excessively extreme and did not give Tesla an opportunity to demonstrate what level of compensation would be fair and reasonable.

The Supreme Court stated that overturning the pay package was neither appropriate nor fair to Musk, and effectively left him without any compensation for the time and effort he contributed over a six-year period. The 2018 package was valued at around 56 billion US dollars at the time; based on Tesla’s closing share price on Friday, it would now be worth roughly 139 billion US dollars.

However, Musk has never actually exercised or received these stock options, because shortly after shareholders approved the 2018 pay plan, Tesla’s board was sued by investor Richard Tornetta. In January 2024, the Delaware Court of Chancery struck down the 2018 package on the grounds that the board-approved plan was unfair to Tesla’s shareholders.

Under the 2018 compensation agreement, Musk was granted options to purchase approximately 304 million Tesla shares at a steep discount, provided the company hit a series of ambitious milestone targets — milestones Tesla has subsequently met. These options account for about 9% of Tesla’s shares outstanding. If Musk exercises all of the stock options under the 2018 plan, his stake in Tesla would rise from about 12.4% to roughly 18.1% after accounting for the resulting share dilution.

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In November this year, Tesla shareholders also voted to approve an even larger CEO compensation package for Musk. If he can deliver on a series of aggressive revenue and product targets over the next decade, the total value of this package could reach as high as 1 trillion US dollars.