Tesla (NASDAQ:TSLA) is planning to request shareholders to reinstate a $56 billion compensation package for CEO Elon Musk that was previously rejected by a judge in Delaware. Additionally, the electric car manufacturer aims to relocate its corporate headquarters from Delaware to Texas.
The company disclosed its intentions in a filing with federal regulators on Wednesday, indicating that shareholders would vote on these matters during the annual meeting scheduled for June 13.
Earlier this year, Chancellor Kathaleen St. Jude McCormick ruled against Musk’s entitlement to a significant compensation package awarded by Tesla’s board of directors, potentially worth approximately $55.8 billion over a decade starting in 2018. The decision stemmed from a lawsuit filed by a Tesla shareholder, contesting the validity of the package due to alleged non-independent negotiations with Musk.
In response to the court ruling, Musk expressed his intention to shift Tesla’s corporate listing to Texas, where he had already relocated the company’s headquarters. A similar move was swiftly executed with Neuralink, Musk’s brain implant company, which relocated its corporate domicile from Delaware to Nevada.
Chairperson Robyn Denholm emphasized Musk’s contributions to Tesla’s growth in a letter to shareholders, highlighting that the CEO had met all targets outlined in the 2018 pay package. Denholm argued that Musk’s lack of compensation for the past six years, following the court ruling, was unfair and inconsistent with shareholder interests.
Despite Tesla’s record deliveries of over 1.8 million electric vehicles worldwide in 2023, the company has faced challenges this year, including declining share value amid softening electric vehicle sales. The filing revealed that Musk’s compensation package, valued at $55.8 billion at the time of the court ruling, had decreased to $44.9 billion by April 12, reflecting Tesla’s stock decline.
Tesla has responded to market pressures by implementing significant price reductions on certain vehicle models, resulting in decreased profit margins. Additionally, the company recently announced a workforce reduction of approximately 10%, affecting around 14,000 employees.
While the shareholder vote remains advisory, Tesla’s board has pledged to consider investor concerns regarding executive compensation packages, signaling a commitment to addressing shareholder feedback.
Tesla’s shares, which experienced an 8% decline earlier in the week, were relatively stable ahead of the market opening on Wednesday.
Featured Image: DepositPhotos
