Tesla is asking shareholders to once again weigh in on ceo elon musk’s record-breaking $56 billion compensation package that was invalidated by a delaware court earlier this year.
In a recent sec filing, the electric vehicle maker said it will hold a re-vote on the 2018 pay deal at its upcoming annual shareholder meeting on june 13th.
The move comes after chancellor kathaleen mccormick of delaware’s court of chancery ruled in january that musk’s pay package was “excessive” and the product of a “flawed” corporate governance process.
The judge determined that tesla’s board, which she deemed “subservient to musk,” failed to prove the enormous pay deal was necessary to retain musk and incentivize his performance.
Musk’s 2018 compensation plan, the largest ever granted to a corporate executive, included stock options to purchase around 304 million tesla shares, divided into 12 tranches contingent on hitting escalating revenue and profitability targets.
As of 2023, all the tranches had vested as tesla’s valuation soared, making musk the world’s richest person.
In the sec filing, tesla board chair robyn denholm defended the pay package, arguing it was critical to motivate musk and align his incentives with shareholders.
elon has not been paid for any of his work for tesla for the past six years…that strikes us — and the many stockholders from whom we already have heard — as fundamentally unfair, denholm wrote.
Several major institutional investors have publicly backed the compensation deal since the court ruling, according to tesla.
However, the company still faces an uphill battle in securing majority shareholder support given the controversy surrounding musk and concerns about his divided attention across his many ventures.
Musk has been a vocal critic of the delaware court decision, threatening to move tesla’s incorporation out of the state.
The upcoming shareholder vote will also include a proposal to relocate tesla’s corporate home to texas, where musk has increasingly consolidated his businesses and residence in recent years.
If the pay package is rejected again, tesla’s board would need to negotiate a new compensation deal with musk, a process complicated by the court’s rebuke of their prior governance failures.
Some analysts believe musk may use the threat of leaving tesla as leverage to extract an even more generous pay package.
Tesla shares have slumped nearly 40% year-to-date amid weakening demand and musk’s chaotic leadership of twitter.
The outcome of this re-vote will be closely watched for its impact on musk’s commitment to tesla and the company’s future strategic direction.
As of april 18th, tesla stock was trading around $150, well off its november 2021 peak near $410.
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