Delaware Chancery Court judge Kathaleen McCormick sided with Tesla shareholder Richard Tornetta when she made her ruling this week after he sued the tech mogul for receiving a massive sum and being too involved with the compensation committee.
The EV-makers' board of directors approved the compensation back in 2018 before it was green-lit in 2022, and it makes up a large part of the billionaire businessman's net worth, meaning it could shrink from $210 billion to $155 billion.
McCormick said in her ruling: "Swept up by the rhetoric of 'all upside,' or perhaps starry-eyed by Musk's superstar appeal, the board never asked the $55.8 billion question: Was the plan even necessary for Tesla to retain Musk and achieve its goals?"
McCormick noted many of those who decided on the compensation were not independent of Musk, including Todd Maron, who was Musk's divorce attorney and is the General Counsel
The judge wrote: "In fact, Maron was a primary go-between for Musk and the committee, and it is unclear on whose side Maron viewed himself
"Yet many of the documents cited by the defendants as proof of a fair process were drafted by Maron."
McCormick found that Musk had received an "unfair" amount driven by himself and insisted the only remedy would be for him to have his $55.8 million recalled.
She concluded: "In the final analysis, Musk launched a self-driving process, recalibrating the speed and direction along the way as he saw fit.
"The process arrived at an unfair price. And through this litigation, the plaintiff requests a recall."
Reacting, Musk posted to his micro-blogging site X: "Never incorporate your company in the state of Delaware."
He then asked his 170.6 million followers if he should change its state of incorporation to Texas.