Tesla is asking shareholders to vote for a second time on Elon Musk’s massive compensation package, after a Delaware judge voided the first one earlier this year on the grounds that the approval process was “deeply flawed.”
In a proxy statement filed today, Tesla’s board recommends that shareholders simply re-ratify the 2018 pay package in order to address concerns raised by the court ruling — rather than negotiate a new proposal with Musk that could end up costing Tesla even more money.
“The Delaware Court second-guessed your decision”
“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,” Robyn Denholm, the chair of Tesla’s board of directors, wrote in the proxy statement. “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.”
The amount of money that Musk will receive has dropped to $47 billion, according to The New York Times, thanks to Tesla’s stock price slide throughout the year. The company’s shares are down 37 percent since the start of the year on news of fewer EV deliveries to customers and heightened competition from China.
The shareholder who filed the suit, Richard Tornetta, alleged that the board lacked independence from Musk when approving the compensation plan. The board included Musk’s brother, Kimbal Musk, as well as friends Antonio Gracias and Steve Jurvetson. (Jurvetson and Gracias have since left Tesla’s board.) During the trial, Delaware Chancery Court Judge Kathaleen McCormick called this argument a “kill shot.”
After the judge voided the compensation package, Musk posted on X, “Never incorporate your company in the state of Delaware.” The vote to re-ratify will come during Tesla’s annual shareholder meeting on June 13th. The company is also asking shareholders to approve moving Tesla’s state of incorporation to Texas from Delaware and to reelect two board members, James Murdoch and Musk’s brother, Kimbal.
The push comes a few days after Tesla announced it would be laying off 10 percent of its global workforce, or around 14,000 employees. The company has been struggling to find new customers for its aging lineup of vehicles and is facing increasing competition in most markets, especially China.
