The shareholder’s lawyers argued that the compensation package should be voided because it was dictated by Musk and was the product of sham negotiations with directors who were not independent of him. They also said it was approved by shareholders who were given misleading and incomplete disclosures in a proxy statement.
The compensation agreement itself is suspect as Musk himself had over 1/4 of the total voting share and other directors were controlled by him as well. As an example, a shareholder who holds 51% of the shares can’t just choose to legally print himself more of the stock at the expense of the 49% and that is what the lawsuit is alleging.