Tesla vowed to appeal the ruling, saying the decision was “wrong.”
“This ruling, if not overturned, means that judges and plaintiffs’ attorneys are running Delaware companies, not their rightful owners, the shareholders,” the company said in a statement on X.
Judge McCormick said the pay would be the biggest ever for a listed company boss.
Tesla failed to prove that the pay package, which dates back to 2018, was fair, she said.
In June, shareholders voted to pay 75%, but the judge disagreed that the salary should be that large, despite what she called “creative” arguments by Tesla’s lawyers.
“Even if a shareholder vote could have had a ratifying effect, it could not here,” she wrote in her opinion.
The judge also ruled that the Tesla shareholder who brought the case against Tesla and Musk should receive $345 million in awards, but not the $5.6 billion in Tesla stock they were asking for.
Some observers said a ruling in favor of Musk and Tesla would deal a blow to Delaware’s conflict-of-interest laws.
Charles Elson of the Weinberg Center for Corporate Governance at the University of Delaware said that “the idea behind conflict rules is to protect all investors,” not just minority investors.
Mr Elson said Justice McCormick’s opinion was well reasoned.
“You had a board that was not independent, a process that was dominated by the CEO and a package that was beyond any reasonable limits,” he said. “It’s quite a complex combination.”
Mr. Elson said he expects Tesla may try to restore a similar pay package in Texas where the company moved its legal base earlier this year following the wage ruling.
