Despite shareholder approval, Delaware court rules Musk is not entitled to the vast compensation, citing a “deeply flawed” process.

Elon Musk’s $56 billion compensation package from Tesla has been rejected for a second time by Delaware judge Kathleen McCormick. The ruling, made on December 2, 2024, comes despite a June vote by Tesla shareholders to reinstate the package, which had been initially rescinded in January.

McCormick’s decision in January had described the pay package as “excessive,” a move that sent shockwaves through investors and raised questions about Musk’s future with the company. Tesla’s board had argued that the enormous compensation was crucial for keeping Musk at the helm, with the billionaire himself agreeing that it was necessary to ensure his continued involvement.

In her latest ruling, McCormick also mandated that Tesla pay $345 million in legal fees to the attorneys who filed the case. However, this sum is far less than the billions initially requested.

Tesla’s board argued that Musk had met the necessary milestones for the pay package, which was structured around hitting specific revenue and market targets. While the company and shareholders pushed for reinstatement, McCormick maintained her stance that the process leading to Musk’s compensation was deeply flawed.

The 2017 package originally set conditions for Musk to receive 12 tranches of stock options tied to Tesla’s performance. Though shareholders had approved the package in 2018, it faced criticism from some investors, including Norway’s sovereign wealth fund and California’s state teachers’ retirement system.

Musk’s response to the ruling was not immediate, though he had previously criticized McCormick and urged other business leaders to avoid Delaware’s courts. Despite this, he has been vocal in support of the pay package, having even expressed affection for the shareholders in a 2024 Tesla event after the vote.