Tesla CEO Elon Musk’s record-breaking $56bn (£47bn) award will not be returned, a judge has said.
The decision in the Delaware court comes after months of legal wrangling despite being approved by shareholders and directors over the summer.
Judge Kathaleen McCormick upheld her previous ruling from January, in which she said board members were heavily influenced by Mr Musk.
Reacting to the decision, Mr Musk wrote on X: “[S]shareholders should control the company’s votes, not judges.”
Tesla vowed to appeal the decision, saying the decision was “wrong”.
“This decision, if not overturned, means that judges and plaintiffs’ lawyers are running Delaware companies instead of their rightful owners – the shareholders,” the company said in an X post.
Judge McCormick said the pay packet would have been the largest ever for a listed company manager.
Tesla failed to prove that the pay package, which began in 2018, was fair, he said.
A shareholder vote on the payment was passed by 75% in June, but the judge did not agree that the payment should be so large despite what he called “creative” arguments by Tesla’s lawyers.
“Even if a shareholder vote could have an affirmative effect, it would not do so here,” he wrote in his opinion.
The judge also ruled that the Tesla shareholder who filed a lawsuit against Tesla and Mr. Musk should receive $345m but not the $5.6bn in Tesla shares they requested.
Some observers said a ruling in favor of Mr. Musk and Tesla would have a negative impact on Delaware’s conflict of interest laws.
“The idea of conflict rules is to protect all investors” not just a few investors, said Charles Elson of the University of Delaware’s Weinberg Center for Corporate Governance.
Mr Elson said Judge McCormick’s opinion was reasonable.
“You had an independent board, a system dominated by the CEO, and a package that was outside any reasonable limits,” he said. “It’s quite a combo.”
Mr. Elson said he expects Tesla to try to recreate a similar pay package in Texas where the company has moved its legal base earlier this year after the salary decision.
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