Elon Musk’s record $56 billion Tesla payment contract has been rejected for the second time

Tesla CEO Elon Musk’s record $56bn (£47bn) salary will not be reinstated, a judge has ruled.

The Delaware court decision comes after months of legal wrangling and despite approval from shareholders and directors over the summer.

Judge Kathleen McCormick upheld her previous decision in January, in which she argued that board members were too strongly influenced by Musk.

In response to the ruling, Mr Musk wrote on X: “Shareholders should control the company’s voices, not the judges.”

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 report on X.

Judge McCormick said the pay package would have been the largest for the boss of a listed company.

She said Tesla failed to prove the pay package, which dates back to 2018, was fair.

In June, a shareholder vote on the payment passed by 75%, but the judge disagreed that the payout should be that high, despite what she called “creative” arguments by Tesla’s lawyers.

“Even if a shareholder 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 brought the case against Tesla and Mr. Musk should receive $345 million in royalties, but not the $5.6 billion in Tesla stock they were seeking.

Some observers said a ruling in favor of Musk and Tesla would have dealt a blow to Delaware’s conflict-of-interest laws.

“The idea behind 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 Justice McCormick’s view was well-reasoned.

“You had a board that was not 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 combination.”

Mr. Elson said he expected Tesla might try to create a similar pay package in Texas where the company moved its legal base earlier this year after the wage ruling.