One of Jurgelewicz's attorneys, Tom Towe, said revoking the stock was the right thing to do but does not fully remedy the violations of the company's internal compensation plan.
"That violation needs to be explained before those shareholders vote on the election of the directors next month," he said.
An April 25 hearing is set on a preliminary injunction sought by the plaintiff, but it was uncertain if it would take place now that the shares have been revoked.
Stillwater is the only U.S. producer of platinum and palladium â¿¿ precious metals primarily used to make catalytic converters that reduce vehicle pollution.
Schweitzer has teamed with a New York hedge fund, the Clinton Group, in the bid to oust McAllister and other Stillwater board members. They would be replaced with a new team that would include the former Democratic governor.
Clinton Group managing director Greg Taxin said it was shocking that the company's board of directors "blew right past the limits approved by stockholders" in awarding McAllister the shares.
The company employs more than 1,664 people and operates two mines in the Beartooth Mountains of south-central Montana. It also runs a precious metals recycling plant in Columbus.
In recent years, Stillwater sought to expand internationally. Under McAllister's leadership, it bought a proposed palladium and platinum mine in Canada and a vast reserve of copper in a remote area of the Andes in Argentina.
The foreign ventures cost an estimated $525 million. Critics including Schweitzer say the purchases distracted from the company's core operations in Montana, driving down the stock price as potential investors shied away.