Litigation Update: In re Tesla, Inc. Derivative Litigation

In 2018, Tesla’s board of directors proposed, and its stockholders approved by a wide margin, a significant executive compensation plan for CEO Elon Musk. Under the plan, Musk stood to earn tens of billions of dollars if he achieved a series of highly ambitious performance milestones that would increase Tesla’s market value by hundreds of billions. Over time, Tesla’s value rose dramatically—by more than 1,000%—with shareholders retaining the vast majority of the created value and Musk receiving substantial compensation.A Tesla stockholder subsequently filed suit, alleging that the compensation plan was unfair to the company and that the board’s approval process was compromised by a lack of independence. The Delaware Court of Chancery agreed, finding that the board was not sufficiently independent of Musk, that the stockholder approval was ineffective, and that the plan was substantively unfair to Tesla. The court rescinded the plan and later awarded the plaintiff’s attorneys $345 million in fees.Tesla’s response included reapproving the plan through another stockholder vote, though the Court of Chancery deemed that ratification ineffective as well. The litigation has sparked broader discussion about Delaware corporate law, shareholder rights, and potential legislative reforms, and it has coincided with Tesla’s decision to reincorporate in Texas.Following oral arguments before the Delaware Supreme Court on October 15, 2025, former Chief Justice Myron T. Steele (of counsel, Potter Anderson) and Robert T. Miller, the Allison & Dorothy Rouse Chair in Law at George Mason University’s Scalia Law School, will discuss the case and its implications for corporate governance and executive compensation.
Featuring:

Hon. Myron T. Steele, Former Chief Justice, Delaware Supreme Court; Of Counsel, Potter Anderson
(Moderator) Robert T. Miller, Allison & Dorothy Rouse Chair in Law, Antonin Scalia Law School, George Mason University