In January 2024, the Delaware Court of Chancery ordered Tesla’s 2018 CEO performance award to Elon Musk rescinded, finding the director defendants had not proved it was entirely fair. A later stockholder vote did not persuade that court to reopen its judgment; the Delaware Supreme Court subsequently reversed the rescission, reinstated the 2018 plan and awarded the plaintiff nominal damages.
How the case moved from the 2018 award to the current outcome
Tornetta v. Musk was a stockholder derivative case challenging the Tesla board’s 2018 performance award to Musk. The award had twelve option tranches tied to market-capitalization and operational milestones. After a five-day trial, Chancellor Kathaleen McCormick issued a post-trial opinion on January 30, 2024, concluding that the defendants had not carried their burden to show the award was entirely fair to Tesla and its stockholders. The court ordered rescission.
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| Stage | What happened | What it meant |
|---|---|---|
| January 2024: post-trial ruling | The Court of Chancery found the defendants had not proved the 2018 award entirely fair and ordered it rescinded. | This was the trial court’s judgment after examining the award and the board’s process. |
| June 13, 2024: later stockholder vote | Tesla put ratification of the rescinded award to stockholders. Tesla’s later SEC filing reported that 72% of disinterested voting shares supported ratification. | The vote was a later ratification effort, not the original 2018 approval and not itself a court order reversing the judgment. |
| December 2, 2024: post-judgment ruling | The Court of Chancery declined to revise its post-trial opinion, concluding that the later vote did not provide a basis under the procedural rules invoked to reopen the adjudicated case. It also addressed whether the vote and its disclosures met relevant legal safeguards. | The trial court’s rescission remedy remained in place at that stage. Tesla disputed the court’s conclusions. |
| Later appeal: Delaware Supreme Court | The Supreme Court reversed rescission, reinstated the 2018 plan and awarded the plaintiff nominal damages. | This appellate disposition changed the remedy and is the later outcome, distinct from the Chancery Court’s 2024 rulings. |
The Delaware Supreme Court summarized the case and its disposition in its later opinion. In the court’s words: “We reinstate the 2018 plan and award the Plaintiff nominal damages.” That is the appellate result, not what the trial judge decided in January 2024.
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The opinion did not treat the size of Tesla’s growth targets or the passage of time in board discussions as a substitute for demonstrating a fair process and a fair price. McCormick examined Musk’s influence over the timing and terms, the directors’ relationships with him, the substance of the board’s work, the award’s price and whether such a package was needed to retain him.
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The process mattered more than the meeting count
The defense pointed to the board’s work on the award, but the opinion scrutinized what that work actually established. McCormick wrote: “The defendants’ statistics, however, elide the lack of substantive work. Time spent only matters when well spent.” Her point was not that time or meetings are irrelevant; it was that they do not establish meaningful negotiation on their own.
The court tested the growth argument against the record
The defendants characterized the award as “6% for $600 billion of growth in stockholder value.” The opinion considered that framing alongside Musk’s existing equity stake and the record on whether the award caused the growth attributed to it. Those figures describe the defense’s argument in the opinion; they are not independent measurements of the award’s realized value.
Retention was a separate question
The court also considered whether the very large award was necessary to retain Musk. That question was part of the fairness analysis, not simply whether the milestones were ambitious or whether Tesla’s stockholders could benefit if they were achieved.
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What the 2024 vote did—and did not—establish
The June 2024 vote happened after the trial and the January ruling. It should not be conflated with the original 2018 approval: stockholders were then asked to ratify an award that the Court of Chancery had already ordered rescinded. Tesla’s Form 10-Q for the quarter ended June 30, 2025, reported that 72% of disinterested voting shares supported ratification.
Tesla’s proxy materials also reported a separate result: approximately 84% of non-Musk and non-Kimbal shares represented and entitled to vote supported moving the company’s incorporation from Delaware to Texas. Tesla’s 2025 proxy stated that the redomestication took effect in June 2024. That percentage refers to the Texas redomestication vote, not ratification of Musk’s pay award.
In its 2024 proxy rationale, Tesla said rejecting ratification could lead to a potential accounting charge of more than $25 billion. The Court of Chancery’s December 2024 opinion recounted that company position. It was a stated potential consequence, not a charge shown to have been incurred.
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Why the judge’s opinion still matters after the appeal
The appellate outcome changed the legal remedy: the 2018 plan was reinstated and the plaintiff received nominal damages. It does not turn the trial judge’s January 2024 opinion into a finding that the board’s process was fair. The decisions answer different questions at different stages: the Chancery Court’s post-trial analysis and remedy, its refusal to revise that judgment after the later vote, and the Supreme Court’s eventual appellate disposition.
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For readers interested in corporate governance, the opinion’s central lesson is specific: a performance award’s targets and a company’s subsequent growth do not, by themselves, answer whether the board negotiated the award fairly, whether its price was fair, or whether the package was necessary to retain the executive. The Supreme Court’s later ruling controls the plan’s disposition described here; the trial opinion remains the account of why the Chancery Court initially ordered rescission.
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