A judge has ruled that Tesla CEO Elon Musk’s record $56 billion (£47 billion) pay package will not be reinstated.
The Delaware court’s decision follows months of legal disputes, even though the compensation was approved by shareholders and directors earlier this year.
Judge Kathaleen McCormick reaffirmed her January ruling, stating that Tesla’s board members were overly influenced by Mr. Musk during the approval process.
Reacting to the ruling, Mr Musk wrote on X: “[S]hareholders should control company votes, not judges.”
Tesla vowed to appeal the ruling, saying the decision was “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 said the pay package would have been the largest ever for the boss of a listed company.
Tesla failed to prove the pay package, which dates back to 2018, was fair, she said.
A shareholder vote on the payment passed by 75% in June, but the judge did not agree the pay should be so large despite what she called 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 determined that the Tesla shareholder who filed the case against the company and Mr. Musk should be awarded $345 million in legal fees, but denied their request for $5.6 billion in Tesla shares.
Some analysts noted that a decision favoring 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 said Judge McCormick’s opinion was well-reasoned.
“You had a board that wasn’t independent, a process that was dominated by the chief executive, and a package that was way out of any sort of reasonable bounds,” he said. “It’s quite a combo.”
Mr. Elson 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 ruling.