Tesla to ask shareholders to reinstate $55 billion pay package for Musk rejected by Delaware judge
Austin, Texas — Tesla will ask shareholders to reinstate a $55 billion compensation package for CEO Elon Musk that was rejected by a Delaware judge this year, and to move the electric carmaker’s corporate house from Delaware to Texas.
In a filing with federal regulators, the company said early Wednesday that it would ask shareholders to vote on both issues at its annual meeting in June.
In January, Chancellor Kathaleen St. Jude McCormick ruled that Musk is not entitled to a landmark compensation package awarded by Tesla’s board of directors that is potentially worth more than $55 billion.
Five years ago, a Tesla shareholder lawsuit alleged that the pay 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.
Musk said a month after the judge’s ruling that he would seek to move Tesla’s corporate listing to Texas, where he has already moved the company’s headquarters.
Almost immediately after the judge’s ruling, Musk did just that with Neuralink, his brain implant company, which moved its corporate home from Delaware to Nevada.
In a letter to shareholders this week, Chairman Robyn Denholm said Musk has delivered the growth he was looking for at the automaker, with Tesla meeting all targets for its 2018 CEO compensation package.
“Because the Delaware court questioned your decision, Elon has not been paid over the past six years for his work for Tesla, which helped generate significant growth and shareholder value,” Denholm wrote. “That seems to us – and the many shareholders we have already heard from – fundamentally unfair and contrary to the will of the shareholders who voted for it.”
Tesla will have produced and delivered more than 1.8 million electric vehicles worldwide by 2023, according to a regulatory filing. But the shares have lost about a third of their value so far this year as electric vehicle sales decline.
Still, Tesla’s sales are now falling sharply and getting shareholders to support a fatter pay package may be a challenge in an environment where global competition has increased and demand for electric vehicle sales is declining. Massive price cuts at Tesla have failed to attract more buyers. The company said it delivered 386,810 vehicles from January through March, down nearly 9% from the same period last year.
Since last year, Tesla has lowered prices on some models by as much as $20,000. The price cuts reduced the value of used electric vehicles and limited Tesla’s profit margins.
This week, Tesla said it would let go about 10% of its employees, about 14,000 people.
Tesla will hold its annual shareholder meeting on June 13.