Tesla is seeking shareholder approval to reinstate a $56 billion compensation package for CEO Elon Musk, as well as its request to move its corporate home from Delaware to Texas. In January, a judge in Delaware rejected the compensation package, ruling that Musk was not entitled to it. The package had been awarded by Tesla’s board of directors and was potentially worth about $55.8 billion over 10 years starting in 2018.
The decision to reject the compensation package came as a result of a shareholder lawsuit filed five years ago, which claimed that the pay package should be voided because it was influenced by Musk and resulted from negotiations with directors who were not independent of him. Chancellor Kathaleen St. Jude McCormick agreed with this argument.
Following the judge’s ruling, Musk expressed his intention to move Tesla’s corporate listing to Texas, where he had already relocated the company headquarters. He took immediate action with his privately held brain implant company, Neuralink, moving its corporate home from Delaware to Nevada.
In a letter to shareholders this week, Chairperson Robyn Denholm defended Musk’s performance, stating that he had delivered the growth the company was seeking. Denholm argued that Musk should be compensated for his work over the past six years, as it had contributed significantly to Tesla’s growth and stockholder value.
However, Tesla has faced challenges this year. Although the company set a record for deliveries of over 1.8 million electric vehicles worldwide in 2023, its shares have suffered due to a decline in electric vehicle sales. Competition in the electric vehicle market has intensified globally, and Tesla’s future growth may be uncertain. As a result, it might be difficult for shareholders to support a generous compensation package.
Tesla’s shares have lost more than one third of their value this year, and the company saw a decline in vehicle deliveries from January through March compared to the same period last year. Price cuts on Tesla’s models have been implemented to attract buyers, but these reductions have caused used electric vehicle values to drop and have impacted the company’s profit margins.
In response to these challenges, Tesla announced that it would be letting go of about 10% of its workforce, which amounts to approximately 14,000 employees. By making this decision, the company aims to streamline operations and improve efficiency.
Tesla’s board wrote in a filing that the decision to seek shareholder approval for Musk’s 2018 pay package was made after receiving a report from a special committee of one board member, Kathleen Wilson-Thompson. This committee evaluated the concerns of shareholders and their views on executive compensation packages. The board also stated that if there is significant opposition to future executive pay packages, they will consider the concerns raised by stockholders and take necessary actions to address them.
Despite these efforts, Tesla’s shares continue to decline, with an additional 8% drop this week. The company’s shareholders will vote on the compensation package and other matters during its annual meeting on June 13. It is important to note that shareholder voting on future executive compensation is advisory only.
In conclusion, Tesla is seeking approval from shareholders to reinstate Elon Musk’s $56 billion compensation package, which was previously rejected by a judge. The company also plans to relocate its corporate home from Delaware to Texas. However, Tesla faces challenges such as declining stock value and reduced vehicle deliveries. The company has implemented price cuts and layoffs to counter these issues. Shareholders will have the opportunity to voice their opinions on executive compensation during the annual meeting, though their vote is advisory in nature.