Apr 17, 2024 - Business

Tesla asks shareholders to help Elon Musk get paid $56 billion

A man with gray stubble laughs

Elon Musk attends the 10th Annual Breakthrough Prize Ceremony at Academy Museum of Motion Pictures on April 13 in Los Angeles. Photo by Axelle/Bauer-Griffin/FilmMagic

Tesla is asking shareholders to authorize a pay package for CEO Elon Musk that a Delaware court recently invalidated.

The big picture: Delaware Chancery Court Chancellor Kathaleen McCormick ruled in January that Musk had not proven his $56 billion compensation deal was fairly approved.

  • The request comes as Tesla's stock has slumped in 2024 amid concerns about middling demand for EVs.
  • Shareholders will vote at the company's annual meeting June 13.

Driving the news: Tesla on Wednesday filed a proxy statement with the Securities and Exchange Commission asking shareholders to sign off on Musk's pay.

  • The company also asked stockholders to approve its plan to move its state of incorporation from Delaware to Texas, where it has already moved its corporate headquarters. Musk has said he believes the company will be treated more favorably there.

Flashback: Shareholders initially approved Musk's pay in 2018.

  • But McCormick ruled that he "enjoyed thick ties with the directors tasked with negotiating on behalf of Tesla, and dominated the process" that formulated the compensation plan.

Tesla has maintained that the deal was designed transparently and fairly.

  • "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," Tesla chair Robyn Denholm wrote in the proxy statement, blaming the Delaware Court for having "second-guessed" the board's decision.
  • "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."
  • She hailed Musk for leading Tesla to new heights and said he deserves the original compensation deal: "The Board stands behind this pay package."

Between the lines: Wedbush Securities analyst Dan Ives wrote Wednesday: "We would expect the 2018 package will be reapproved and the Delaware court ruling would be moot in essence as Tesla will now be moving to Texas."

  • Ives noted this "has been an area of contention among some investors."
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