Tesla again seeks shareholder approval for Musk’s 2018 pay voided by judge
Tesla on Wednesday asked its shareholders to once again approve CEO Elon Musk’s record-breaking $56 billion pay that was set in 2018, but was rejected by a Delaware judge in January.
The compensation includes no salary or cash bonus, but sets rewards based on Tesla’s market value rising to as much as $650 billion over the next 10 years. Tesla is now valued at $500.36 billion, according to LSEG data.
The re-vote comes ahead of next week’s quarterly earnings for Tesla, which is grappling with weak demand as well as a reputational hit to Musk from his political leanings and antisemitic comment last year.
Musk’s pay was rejected by Kathaleen Mccormick of Delaware’s Court of Chancery, who termed the compensation granted by the board as “an unfathomable sum” that was unfair to shareholders.
The January ruling, which can be appealed, had nullified the largest pay package in corporate America.
“We do not agree with what the Delaware Court decided, and we do not think that what the Delaware Court said is how corporate law should or does work,” Board Chairperson Robyn Denholm wrote in a letter included in the regulatory filing.
In seeking a re-vote, Tesla is using a section of Delaware law that allows companies to ratify actions that were technically defective such as selling stock before the board approves an increase in shares, but not always controversial.
The board’s special committee said it cannot predict if the re-approval of the pay package would be proper under Delaware law, while describing its approach as “novel”.
“Even if the proposal is approved, it cannot override the judge’s decision, which is legally binding, at least until Musk appeals successfully,” said Xu Jiang, an associate professor of business administration at Duke University.
If shareholders overwhelmingly approve the proposal for the second time, it would help Musk in his future appeal, Jiang said.