Tesla is now reincorporated in Texas so Texas laws are what matter for the new 2025 pay package. The shareholders will vote November 6 on the new pay package. Texas laws limit shareholder litigation over approved pay packages. Texas require shareholders to hold at least 3% of outstanding shares to file a lawsuit, and Tesla has adopted this threshold—making it virtually impossible for ordinary investors to sue over executive compensation. Most legal experts believe this move gives management and controlling shareholders far greater protection against legal challenges in Texas than in Delaware.
Delaware politicians have advanced new laws that make it significantly more difficult for shareholders to sue over approved CEO pay packages. They also aim to shield corporations and executives from shareholder accountability and litigation. However, exceptions persist for breaches of fiduciary duty, bad faith, or improper personal benefit, and derivative lawsuits may still be possible under certain circumstances.
Delaware’s new laws are designed to stop the exodus of tech companies by limiting shareholder lawsuits, especially in cases involving executive pay.
The legislation was partly prompted by cases like Tesla’s, where the courts struck down huge pay packages after shareholder suits.
Exceptions remain for certain bad actor scenarios, but routine challenges to board-approved compensation are now much more difficult.
Texas laws mean only a handful of large institutional investors (not retail shareholders) could possibly bring suit.
Texas has also removed requirements for jury trials in business disputes, sending challenges to a specialist court, further reducing litigation risk for corporations.
Status of the 2018 Tesla CEO Pay Package
The 2018 Tesla CEO pay package for Elon Musk, originally valued at around $56 billion, remains voided following two rulings by the Delaware Court of Chancery: the initial rescission in January 2024 and a second rejection in December 2024, despite a second June 2024 shareholder ratification vote (two ratification votes at about 72% in favor).
Tesla appealed the decision to the Delaware Supreme Court, with briefing beginning around March 2025. Oral arguments are scheduled for October 15, 2025, in Dover, Delaware, after which a decision could take several months.
Delaware Senate Bill 21 (SB21), enacted in March 2025, introduces a new statutory definition for a controlling stockholder under the Delaware General Corporation Law (DGCL). It defines a controlling stockholder as one who either owns or controls a majority of the corporation’s voting power, or owns or controls at least one-third of the voting power while exercising actual control over the corporation. It is not retroactive.
The current justices of the Delaware Supreme Court as of September 2025 are:
Chief Justice Collins J. Seitz, Jr.
Justice Karen L. Valihura
Justice Gary F. Traynor
Justice Abigail M. LeGrow
Justice N. Christopher Griffiths
Predictions on their ruling for Tesla’s appeal of the voided 2018 CEO pay package are mixed.
Tesla has implemented workarounds independent of the Delaware appeal outcome. This includes a interim compensation package approved in August 2025, granting Elon Musk approximately $29 billion in restricted stock units (roughly 30-50% of the original 2018 package’s value. If Delaware does not overturn on appeal, Elon will get just under half of the 2018 package. If Delaware does overturn then he gets all of the 2018 package.
The 2025 pay package is independent an would need a large institution to sue and win with a specialist court.
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Is there a risk of a class action with more than 3% of shares in total ?
theoretically yes. Practically no. Plus it goes to a specialist court not to jury trial
So Musk could potentially get both the 2018 pay package of $56b and the new 10-year pay package worth up to a $1t?
I read the details on the new PP and didn’t see any offset due to a possible win in the Delaware case. That is material and could be a “double whammy” for shareholders in the near term until the conditions of the original PP run out of time or are fulfilled. I personally don’t believe the full terms of the new PP will ever be met within the 10 years and/or that Musk will not serve those entire 10 years as Tesla CEO. It’s almost unheard of for a multi-billionaire to serve at his main career position until he qualifies for Medicare (65). They just have too many other options, get too tired/sick/stressed/die (Steve Jobs). I’ll vote for the PP with my little holdings in Tesla, since I’m satisfied that the conditions are high enough that there is still attractive shareholder value – and hence, incentive to buy the stock by others – even if they are met, but don’t feel full disclosure has been made with respect to BOTH PPs being potentially available in the future.
“So Musk could potentially get both the 2018 pay package of $56b and the new 10-year pay package worth up to a $1t?”
Sure. But keep in mind that the 2018 pay package was for goals already met. Tesla has owed it to him already for some time, it’s just that the Delaware court was blocking paying him.
While the new 10 year pay package would be for meeting FURTHER goals, and doesn’t get awarded for quite a while.
Makes more sense. The case where trash heavy metal drummer filed a lawsuit with few corrupt lawyers and won is not so fair. [NBF: corrected some spelling and add note that the suit is being appealed]