Tesla wants shareholders to reinstate $56B Musk pay package
DETROIT — Tesla will ask shareholders to reinstate a $56 billion compensation package for CEO Elon Musk that was rejected by a judge in Delaware this year and to move the electric car maker’s corporate home from Delaware to Texas.
In a filing with federal regulators early Wednesday, the company said it would ask shareholders to vote on both issues during its annual meeting on June 13.
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 about $55.8 billion over 10 years starting in 2018.
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 try to move Tesla’s corporate listing to Texas, where he has already moved company headquarters.
Almost immediately after the judge’s ruling, Musk did exactly that with Neuralink, his privately held brain implant company, moving its corporate home from Delaware to Nevada.
In a letter to shareholders this week, Chairperson Robyn Denholm said that Musk has delivered on the growth it was looking for at the automaker, with Tesla meeting all of the stock value and operational targets in a 2018 CEO pay package that was approved by shareholders.
“Because the Delaware Court second-guessed your decision, Elon has not been paid for any of his work for Tesla for the past six years that has helped to generate significant growth and stockholder value,” Denholm wrote. “That strikes us — and the many stockholders from whom we already have heard — as fundamentally unfair, and inconsistent with the will of the stockholders who voted for it.”
Tesla posted record deliveries of more than 1.8 million electric vehicles worldwide in 2023, according to a regulatory filing. But the value its shares has eroded quickly this year as sales of electric vehicles soften.
More growth is in doubt, and it might be a challenge to get shareholders to back a fat pay package in an environment where competition has increased worldwide and demand for electric vehicle sales is fading.
Tesla’s shares have lost more than one third of their value this year as price cuts have failed to draw more buyers. The company said it delivered 386,810 vehicles from January through March, nearly 9 percent fewer than it sold in the same period last year.
Shareholders also will be asked to cast a nonbinding advisory vote on 2023 executive compensation.
But the proxy statement filed with the Securities and Exchange Commission does not address Musk’s demand to own 25 percent of Tesla shares for him to pursue artificial intelligence and robotics at the company. At present he owns 20.5 percent of the company.
In January Musk challenged the Tesla board in a post on X, the social media platform he owns, to come up with a new compensation package. Unless he gets 25 percent, he wrote that he would prefer to build products outside of Tesla, apparently with another company.
Wedbush analyst Dan Ives, who is normally bullish on Tesla, said in an interview that the filing doesn’t address multiple issues including Musk’s future compensation.
“It’s the elephant in the room because Musk has threatened over X, and it’s been a massive overhang” for Tesla stock, Ives said.
Musk, he said, needs to commit to being Tesla CEO for three to five years and developing artificial intelligence with the company. When the company announces first-quarter earnings next week, Musk needs to spell out plans for growth, including the status of the Model 2, a small EV that costs about $25,000, Ives said. Otherwise, dark days lie ahead, he said.
“Investors are not just taking Musk’s word,” he said. “There’s a feeling like the plane is crashing into the ocean and the board is focused on their own salted peanuts.”