Tesla Will Ask Shareholders to Give Musk His Billions After All

A $55B compensation package was invalidated by a judge in January
By Kate Seamons,  Newser Staff
Posted Apr 17, 2024 8:30 AM CDT
Tesla Will Ask Shareholders to Give Musk His Billions After All
Tesla CEO Elon Musk leaves the Tesla Gigafactory for electric cars after a visit in Gruenheide near Berlin, Germany, on March 13, 2024.   (AP Photo/Ebrahim Noroozi, File)

"Never incorporate your company in the state of Delaware," Elon Musk said in a January post on X after a Delaware Chancery Court judge voided a Tesla compensation package that had potentially been worth around $55 billion. Now Tesla is asking shareholders to move the company's corporate home—and put that package back in place. The package was originally approved by shareholders in a 2018 vote, but in her January ruling on a shareholder lawsuit, Chancellor Kathaleen McCormick said Tesla's board of directors failed to prove that the CEO compensation plan was "fair." Details:

  • The upcoming vote: In a Wednesday filing with federal regulators, Tesla said shareholders would be asked to vote on both the compensation package and a move of Tesla's corporate home from Delaware to Texas—where it is headquartered—during its annual meeting on June 13. The vote is an advisory one, but the board says that if there is strong opposition to the pay package it will be considered. Shareholders will be provided with "expansive disclosure as to the process undertaken and the potential conflicts of interest that were considered at the time," per the filing, a nod to McCormick's assertion that the process had been opaque.
  • The lawsuit: Five years ago, Tesla shareholders filed a lawsuit seeking to have the compensation package voided on the grounds that it had been designed by Musk and and approved by directors who bent to his will.
  • The nuts and bolts: The package devised in 2018, when the company was valued at $59 billion, gave Musk the right to buy up to 304 million shares at the preset price of $23.34 so long as he met aggressive financial milestones. If he didn't, he'd get nothing. The company's market cap is currently just under $500 billion.

  • The company's current stance: In a letter to shareholders this week, Chairperson Robyn Denholm noted Tesla did hit the targets laid out in the 2018 package. "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. That strikes us—and the many stockholders from whom we already have heard—as fundamentally unfair, and inconsistent with the will of the stockholders." Quartz reports the filing stated 73% of shareholders had voted in favor of the package.
  • The timing: The company did indeed deliver a record 1.8 million electric vehicles last year, but shares are down by more than a third this yeah, with Q1 deliveries down almost 9% year over year. "It may 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," observes the AP.
  • One view: The New York Times notes that "if shareholders now have the opportunity to try to save tens of billions of dollars in compensation costs, it's possible that some might vote against the deal, betting that Musk is already so invested in Tesla that he wouldn't walk away."
  • The fight: CNBC expects the two proposals "to be fiercely controversial." Tesla's filing notes that it has hired proxy solicitor Innisfree M&A and intends to spend seven figures to help secure the votes.
(In the immediate aftermath of the ruling, Musk moved brain implant company Neuralink's corporate home from Delaware to Nevada.)

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