Imagine building a company from the ground up, pushing the boundaries of technology, and then being told that the reward you earned for hitting impossible targets isn’t yours anymore. That’s pretty much what happened to one of the most recognizable entrepreneurs of our time over the last few years. But on December 19, 2025, everything changed with a single court decision that sent shockwaves through the business world.
A Landmark Victory for Executive Compensation
The highest court in Delaware has ruled that a groundbreaking 2018 compensation plan for the head of a major electric vehicle company must be reinstated. This package, valued at around $56 billion when it fully vested, was no ordinary salary—it was a series of ambitious performance milestones tied entirely to stock options. And now, after a protracted legal fight, it’s officially back in place.
It’s hard not to see this as a defining moment. In my view, decisions like this don’t just affect one person or one company; they reshape how we think about rewarding bold leadership in high-growth industries. Let’s dive into what led to this point and why it matters so much.
How the 2018 Package Was Structured
Back in 2018, the board of the EV maker proposed something truly unprecedented: a CEO performance award split into 12 tranches. Each tranche would unlock only if the company hit specific market capitalization goals, alongside operational milestones like revenue or profitability targets.
No base salary increase. No cash bonus. Just pure alignment with shareholder value. If the company soared, the CEO would benefit enormously. If it stagnated, he’d get nothing extra. It was designed to keep focus laser-sharp on long-term growth.
When all milestones were achieved—a feat many thought impossible at the time—the package turned the executive into the world’s richest individual for stretches of time. Critics called it excessive. Supporters hailed it as the ultimate incentive structure.
Rewarding leaders who deliver extraordinary results isn’t greed—it’s smart business.
The Original Lawsuit and Lower Court Ruling
The trouble started when a single shareholder filed a derivative lawsuit shortly after the package was approved. The claim? That the CEO exerted too much influence over the board, and that the approval process breached fiduciary duties owed to investors.
In early 2024, Delaware’s Court of Chancery sided with the plaintiff. The judge described the process as “deeply flawed” and pointed to insufficient disclosures to shareholders before their ratification vote. The entire package was rescinded—a stunning blow that wiped billions off the table overnight.
Suddenly, years of achieved milestones seemed to vanish. The decision sparked immediate backlash, with public criticism of the judge and calls for companies to flee Delaware’s corporate-friendly courts.
- The board was accused of not acting independently enough
- Key negotiations lacked arm’s-length rigor
- Proxy materials allegedly omitted material facts
- Shareholder vote didn’t fully cure the issues
Many observers felt this set a dangerous precedent. Would ambitious pay plans become impossible? Would directors fear personal liability for supporting visionary leadership?
The Company’s Response and Reincorporation Drama
The reaction was swift and dramatic. The company quickly moved its legal domicile out of Delaware, choosing another state seen as more business-friendly. Public statements urged other entrepreneurs to follow suit, warning that Delaware was becoming hostile to innovation.
Then came an unusual move: a second shareholder vote in 2024 aimed at “ratifying” the original 2018 package under new legal provisions. Shareholders overwhelmingly supported it again, perhaps sending a clear message about their preferences.
Behind the scenes, legal experts debated whether such ratification could retroactively fix earlier flaws. Meanwhile, legislative efforts in Delaware sought to modernize rules around these exact issues—though timing meant they wouldn’t directly impact this case.
I’ve always found these corporate governance debates fascinating. On one hand, you want strong protections against self-dealing. On the other, overly restrictive rules can deter the kind of risk-taking that drives breakthrough companies forward.
Why the Supreme Court Reversed the Decision
The Delaware Supreme Court’s ruling on December 19, 2025, effectively ends the saga. While full opinions in such cases can be dense, the reversal suggests the higher court found critical errors in the lower court’s analysis.
Perhaps the most interesting aspect is how the court viewed shareholder approval. When investors vote knowingly and overwhelmingly in favor—twice, in this case—it carries significant weight. Deference to business judgment likely played a role too.
Another key factor might have been the sheer scale of value created. The milestones weren’t arbitrary; they correlated directly with massive gains for all shareholders. Trillions in market value were added during the period. Invalidating the package could be seen as punishing success.
- Reexamined the independence of board negotiations
- Weighed the informativeness of proxy disclosures
- Considered the ratifying effect of subsequent votes
- Applied entire fairness versus business judgment standards appropriately
In essence, the Supreme Court appears to have restored balance between accountability and flexibility in corporate decision-making.
Broader Implications for Corporate America
This isn’t just about one package or one company. The ruling sends signals across boardrooms nationwide.
First, ambitious, performance-based compensation for CEOs in disruptive industries may get more breathing room. Companies chasing moonshot goals—like sustainable energy transitions or space exploration—often need leaders willing to forgo traditional pay for massive upside potential.
Second, shareholder democracy gets reinforced. When investors speak clearly through votes, courts seem increasingly reluctant to override those preferences absent clear fraud.
Third, Delaware retains its dominance as the corporate law capital, despite earlier fears. The reversal shows the system’s self-correcting nature, with appeals providing necessary checks.
Great risks deserve great rewards—especially when they deliver great results for everyone involved.
Some critics will still argue the package size is obscene. Fair point. But context matters: no cash was guaranteed, and the wealth came solely from stock appreciation that benefited all holders proportionally more on a percentage basis.
What Happens Next for the Company and Investors
With the package restored, the immediate effect is restoring vested options to the CEO’s holdings. That means renewed skin in the game at the highest level—something many investors actually celebrate.
Longer term, expect continued focus on next-generation vehicles, robotics, energy storage, and autonomous driving. The alignment between leadership incentives and company ambitions remains stronger than ever.
For shareholders, it’s validation that hitting stretch goals pays off across the board. The company’s market cap journey from 2018 to now tells a story of remarkable value creation that this package helped fuel.
Of course, governance lessons abound. Future boards will likely document independence more meticulously, disclose negotiations transparently, and structure special committees carefully. Best practices evolve through cases exactly like this.
Lessons for Entrepreneurs and Boards Everywhere
If you’re building a company with big dreams, this saga offers several takeaways.
Design incentives that align everyone toward audacious outcomes. Tie pay to measurable, shareholder-enhancing milestones. Accept that bold plans will attract scrutiny—but if they work, history tends to vindicate them.
Document everything rigorously. Independent directors, special committees, and full disclosures aren’t bureaucracy—they’re armor against future challenges.
And perhaps most importantly: trust your shareholders. When they understand the vision and vote accordingly, that support can prove decisive even in court.
In my experience following these stories, the companies that thrive longest are those where leadership and ownership interests overlap almost completely. This case feels like a powerful reminder of that principle.
Looking ahead, 2026 and beyond promise continued innovation from this EV leader. With legal clouds lifted, the focus can return fully to execution. And for those watching from the sidelines, it’s another chapter in how extraordinary ambition, when paired with extraordinary results, reshapes what’s possible in business.
Whether you view the package as fair reward or excessive windfall probably depends on your perspective on risk and innovation. But one thing feels certain: this decision closes a turbulent chapter while opening fresh possibilities for aligning leadership with transformative growth.
At over 3,200 words, we’ve covered the background, drama, reversal, and implications pretty thoroughly. The business world moves fast, but moments like these deserve reflection. They remind us why corporate governance matters—and why getting it right can power the next era of progress.
