My alternative dispute resolution firm, Album Advisory Group Ltd., is designed to resolve executive compensation disputes, as an alternative to litigation. This post revisits the Delaware Supreme Court decision in In Re Tesla, Inc. Derivative Litigation (December 19, 2025), the executive compensation dispute over Musk’s multi-billion dollar “moon shot”
option in 2018.

The Delaware Supreme Court decision was a victory for Musk, Tesla and its outside directors. The lower court had ruled against them, finding a breach of fiduciary duty and had “equitably rescinded” the 2018 award. The Delaware Supreme Court, however, found that the equitable remedy of rescission-which effectively unwound the grant to put the parties back to their original positions in 2018 prior to the award (in legal parlance, restoring the parties to the status quo ante) –was unavailable as a matter of law. In the view of the Delaware Supreme Court the award had been granted in 2018, Musk had provided his services, the vesting targets on the award had been met–so the eggs could not be unscrambled years later and the parties could not leave Musk uncompensated for six
years of work.

Apart from the headline (Musk wins on appeal), there are nuanced and subtle legal twists and turns in the forty-nine page per curiam opinion of the Delaware Supreme Court, both in its reference to the “affirmance” in part of the lower court decision against Musk and the treatment of the remedies available for executive compensation disputes. (For non- lawyers, the Latin term “per curiam” means “by the court” and it is an opinion not authored by a judge but instead presented as an opinion of the court. Per curiam opinions are usually brief and not the norm in major cases.)

The facing page of this per curiam opinion states that “Upon appeal from the Court of Chancery. AFFIRMED IN PART, REVERSED IN PART.” (boldface in the original). The “reversed in part” reference makes sense, since the Delaware Supreme Court did reverse the remedy decision and Musk got his award. But what about that reference to “AFFIRMED IN PART”-so the Delaware Supreme Court was affirming the finding by the lower court that there was a breach of fiduciary duty but reversing the outcome because the plaintiffs sought, and the lower court imposed, the wrong “remedy.”

There are numerous references in the Delaware Supreme Court opinion to the various remedies that have been applied under Delaware law in executive compensation disputes, such as seeking reformation or legal (not equitable) recession or even disgorgement. The Supreme Court discussion is highly technical but worthwhile for practitioners to review for a broader understanding of the risks under Delaware law for unwinding challenged executive compensation decisions. And given the “affirmed in part” aspect of the opinion, practitioners should ensure there is no breach of fiduciary duty when executive compensation decisions involve controllers or conflicted parties.

Executive compensation practitioners should review an excellent recent article on the Tesla decision in The Chancery Daily (www.chancerydaily.com), a specialized daily publication that summarizes corporate and commercial litigation in Delaware (the Testa article appears in the 5/13/26 issue). This is a very detailed and researched piece and deserves a “shout out.” In addition to a review of the various remedies available in Delaware to challenge executive compensation arrangements (with case cites and analysis) there is an interesting discussion of the pleadings by the plaintiffs in the Tesla case, and whether the Delaware Supreme Court should have viewed the record more broadly in favor of the plaintiffs. (The Chancery Daily can also be followed on Linkedin).