A Delaware court has ruled that Elon Musk's record-breaking $56 billion pay award as the chief executive of Tesla will not be reinstated. This decision follows months of legal battles, despite the pay package having been approved by shareholders and directors last summer. Judge Kathaleen McCormick upheld her previous ruling, stating that board members were unduly influenced by Musk.

The pay package, which dates back to 2018, would have been the largest ever awarded to the CEO of a public company. According to Judge McCormick, Tesla failed to demonstrate the fairness of this compensation. Musk, who also leads X (formerly Twitter) and SpaceX, is the world's richest person, with an estimated net worth of around $350 billion.

Tesla has announced plans to appeal the ruling, claiming that the decision is "wrong." The company argued that this ruling suggests judges and plaintiffs' lawyers are controlling Delaware companies instead of the rightful owners—the shareholders. Musk also expressed his thoughts on the ruling, stating on X that "shareholders should control company votes, not judges."

This ruling is viewed as a significant victory for conflict of interest laws in Delaware. Charles Elson, from the University of Delaware's Weinberg Center for Corporate Governance, remarked that Judge McCormick's reasoning was well-founded. "You had a board that wasn't independent, a process dominated by the chief executive, and a pay package that was far beyond any reasonable limits," he said. Tesla is expected to appeal this decision, and some observers speculate that the company may attempt to restructure a similar pay package.