Tesla has once again approached its shareholders to seek approval for CEO Elon Musk’s controversial $56 billion pay package, which was initially set in 2018 but rejected by a Delaware judge earlier this year.
The compensation plan, which includes no salary or cash bonus, is contingent upon Tesla’s market value reaching up to $650 billion over the next decade. Currently, the company is valued at $500.36 billion.
Shareholder Approval Sought Again Following Court Rejection
The decision to seek a re-vote comes ahead of Tesla’s upcoming quarterly earnings report, as the company grapples with weakened demand and reputational challenges stemming from Musk’s political affiliations and a previous antisemitic comment.
In January, the compensation package was deemed “an unfathomable sum” by Kathaleen McCormick of Delaware’s Court of Chancery, who ruled it unfair to shareholders, nullifying what was previously considered 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,” stated Board Chairperson Robyn Denholm in a letter included in the regulatory filing.
Tesla is utilizing a provision of Delaware law to seek a re-vote, citing the ratification of technically defective actions.
However, the board’s special committee acknowledges uncertainty regarding whether the re-approval would be deemed proper under Delaware law, describing its approach as “novel.”
While shareholder approval could potentially bolster Musk’s appeal against the court’s decision, it cannot override the judge’s ruling unless successfully appealed.
In addition to the pay package, Tesla is also seeking approval from investors to relocate the company’s state of incorporation from Delaware to Texas, a move that could escalate tensions between Musk and the state of Delaware.
Tesla faces mounting concerns, including a significant decline in its stock value, slowing electric vehicle sales globally, and scrutiny over Musk’s political affiliations and controversial statements. These challenges have raised questions about the company’s strategic direction and decision-making processes.
