WILMINGTON, Delaware, Dec 2 (Reuters) - Tesla

cannot give Elon Musk a $56 billion compensation package despite

a vote in support of the CEO's pay deal by the company's

shareholders, a Delaware judge ruled on Monday.

Below is a look at what could come next for Tesla and its

billionaire founder, who is still seeking a huge payday from the

company:

WHAT DOES MUSK WANT?

Musk told a special committee of the Tesla board soon after

a judge voided his compensation in January that he wanted a

similar-sized replacement package, according to a securities

filing.

In addition, earlier this year he said on his social media

platform X that he wanted a larger stake in Tesla or he might

develop some products outside the company. Musk's other

companies include rocket venture SpaceX and Neuralink, which

develops brain implants.

TESLA COULD APPEAL THE RULING

Musk and Tesla's board could appeal and try to reverse the

ruling at the Delaware Supreme Court, a process that typically

takes around a year.

The case, which involved the largest-ever pay deal at a

U.S. public company, raises issues that have rarely been

addressed by Delaware judges, adding uncertainty to an appeal.

For example, the trial court judge, Chancellor Kathaleen

McCormick, found that Musk controlled the compensation

negotiations, even though he owned only about 22% of Tesla's

stock.

In addition, Tesla has acknowledged that the June vote

by shareholders to ratify Musk's pay was a "novel" legal tactic

and has said it was unclear how it would be treated under

Delaware law.

TESLA COULD DEVISE A NEW PLAN

Tesla's board could craft a new pay package, although that

could be very expensive.

The original plan, agreed to by Musk and the company in

2018, awarded him stock options if the company hit very

aggressive performance and financial targets. The stock options

allowed Musk to buy Tesla stock priced at the 2018 level. The

company exceeded the targets, and Tesla's stock has risen

10-fold since then, making the options incredibly valuable.

Tesla booked a cost of $2.6 billion when the 2018 plan went

into effect. The company has said that a replacement plan for

the same cost today would likely have to be less than 10% of the

size of the 2018 plan.

COULD TESLA JUST RESTORE THE OLD PLAN?

Tesla could offer Musk the same 304 million stock options

with the same $23.34 exercise price used in the 2018 plan. If

shareholders wanted to challenge that, they would have to sue in

Texas, where the company reincorporated this year, rather than

the Court of Chancery in Delaware.

But the company cannot escape accounting and tax

implications.

Tesla said putting the old plan back in place would require

the company to take a $25 billion charge, according to

securities filings.

In addition, because the stock options would be incredibly

valuable from the moment they are issued, they would be treated

unfavorably for tax purposes as income. Musk could be taxed at

the highest rate and pay a 20% penalty, meaning authorities

could tax his new plan at 57%, according to an analysis by

Schuyler Moore of Greenberg Glusker Fields Claman & Machtinger.

MUSK COULD TRY TO SETTLE THE LAWSUIT

Musk could try to settle the lawsuit, which was brought by a

Tesla shareholder, and accept a smaller portion of his pay

package. However, that would contradict his track record of

taking cases to trial rather than striking deals, even in the

face of huge potential liability. It is unclear how McCormick

would view a settlement at this stage in the litigation.