Elon Musk's colossal $55 billion Tesla pay package has been denied by the judge following legal action by a shareholder aiming to block this unprecedented compensation.

The judge nullified the pay package on Tuesday, stating that the board of directors failed to demonstrate the fairness of the compensation plan.

Tesla had awarded Elon Musk, aged 52, the pay package in 2018, which was described by Delaware Chancery Court Judge Kathaleen St. J. McCormick as the “largest potential compensation opportunity ever observed in public markets by multiple orders of magnitude,” in her 200-page ruling.

Richard Tornetta, a Tesla shareholder, requested the state's business law court to invalidate the package.

He claimed that Tesla's board of directors “breached their fiduciary duties by awarding Elon Musk a performance-based equity-compensation plan,” as stated by McCormick.

McCormick stated that Tornetta demonstrated Musk's influence over Tesla, highlighting the "deeply flawed" process that led to the approval of Musk's pay package.

The judge pointed out Musk's significant connections with those negotiating on Tesla's behalf, noting that Musk independently steered the self-driving process, adjusting its speed and direction as he deemed appropriate.

McCormick emphasized Musk's substantial impact on Tesla, owing to his close ties with the company and its directors.

“In addition to his 21.9% equity stake, Musk was the paradigmatic ‘Superstar CEO,’ who held some of the most influential corporate positions (CEO, Chair, and founder), enjoyed thick ties with the directors tasked with negotiating on behalf of Tesla, and dominated the process that led to board approval of his compensation plan,” McCormick noted.

She added, “At least as to this transaction, Musk controlled Tesla.”

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McCormick argued that formulating Musk's pay package resulted in an unjust valuation, stating that the “plaintiff is entitled to rescission.”

Musk’s team was “unable to prove that the stockholder vote was fully informed because the proxy statement inaccurately described key directors as independent and misleadingly omitted details about the process,” McCormick added.

“The parties are to confer on a form of final order implementing this decision and submit a joint letter identifying all issues, including fees, that need to be addressed to bring this matter to a conclusion at the trial level,” the judge’s decision read.

Musk took to his X (formerly Twitter), shortly after the ruling was published, “Never incorporate your company in the state of Delaware.”

CNBC notes that Elon Musk possesses approximately 13% of Tesla's shares directly. In December, he expressed on Twitter his unease about steering Tesla to become a forefront figure in AI and robotics without securing approximately 25% voting control.

This would be sufficient to exert influence but not to an extent that he couldn't be overruled.