By Dan Mangan -
CNBC
A Delaware judge on Tuesday struck down Tesla CEO Elon Musk's $56 billion pay package, ruling that the company's board of directors "erred that the compensation plan was fair."
Tesla's stock price
slid about 3%
in after-hours trading Tuesday following the decision in the lawsuit filed by Richard Tornetta, a shareholder in the electric automaker.
Elon Musk, CEO of Tesla and SpaceX, speaks at the SATELLITE Conference and Expo in Washington, Monday, March 9, 2020. Susan Walsh / AP
"Plaintiff is entitled to termination," Delaware Court of Chancery Judge Kathaleen McCormick wrote in her ruling accepting that Musk's pay package was inappropriately set by Tesla's board of directors.
"The parties should consult on a final form implementing this decision and submit a joint letter identifying all issues, including fees, that must be addressed to bring this matter to a conclusion at the judicial level," McCormick said.
The 2018 CEO pay package that Tesla awarded Musk
is unmatched in the history of corporate compensation plans
, and made the Tesla and SpaceX CEO a "centibillionaire" and the richest person on the planet.
CNBC has asked Musk, his lawyer and Tornetta's lawyer for comment.
In a message on the social network X late Tuesday afternoon, Musk wrote: "Never start your company in the state of Delaware."
McCormick noted that his ruling was based on the conclusion that
Musk controlled Tesla
, rather than its board of directors and shareholders, at least when it came to setting his compensation.
The judge wrote: “In addition to his 21.9% stake, Musk was the paradigmatic 'superstar CEO', holding some of the most influential corporate positions [CEO, president and founder],
enjoying close ties to the directors in charge of negotiate
on behalf of Tesla and dominated the process leading to board approval of its compensation plan.”
Tesla and Musk's lawyers, the court decided, "were unable to demonstrate that the shareholder vote was based on full information, because the proxy list incorrectly described key directors as independent and misleadingly omitted details about the process."
Earlier this month, Musk began fighting for 25% of Tesla's voting control.
He currently owns about 13% of the company's shares.
[An Elon Musk company implants the first brain device in a human being]
"I feel uncomfortable growing Tesla to be a leader in artificial intelligence and robotics
without having 25% control of the vote
. Enough to be influential, but not so much that I can't be overthrown," he wrote in a message on the social network X, formerly known as Twitter.