A judge has ruled that Tesla CEO Elon Musk’s record $56 billion (£47 billion) pay package will not be reinstated.
The decision by a Delaware court comes after months of legal disputes, despite the compensation being approved by shareholders and directors earlier this year.
Judge Kathaleen McCormick reaffirmed her January ruling, stating that Tesla’s board members were unduly influenced by Mr Musk during the approval process.
Reacting to the decision, Mr Musk wrote on X: “Shareholders should control company votes, not judges.”
Tesla has vowed to appeal the ruling, calling the decision “wrong.”
“This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners – the shareholders,” the company said in a post on X.
Judge McCormick noted that the pay package would have been the largest ever awarded to the head of a publicly listed company.
She said Tesla had failed to prove that the pay package, which dates back to 2018, was fair.
While a shareholder vote on the compensation passed with 75% approval in June, the judge argued that the pay should not be so large, dismissing Tesla’s lawyers’ “creative” arguments.
“Even if a stockholder vote could have a ratifying effect, it could not do so here,” she wrote in her opinion.
The judge also ruled that the Tesla shareholder who filed the case against the company and Mr Musk should be awarded $345 million (£287 million) in legal fees, though she rejected their request for $5.6 billion (£4.7 billion) in Tesla shares.
Some analysts suggested that a ruling in favour of Mr Musk and Tesla could have weakened conflict-of-interest regulations in Delaware.
“The idea of conflict rules is to protect all investors, not just minority investors,” said Charles Elson of the University of Delaware’s Weinberg Center for Corporate Governance.
Mr Elson described Judge McCormick’s opinion as well-reasoned.
“You had a board that wasn’t independent, a process that was dominated by the chief executive, and a package that was far beyond any reasonable bounds,” he said. “It’s quite a combination.”
He also suggested that Tesla may attempt to recreate a similar compensation package in Texas, where the company relocated its legal headquarters earlier this year following the pay dispute.
