Tesla asks shareholders to back $56bn pay for Elon Musk rejected by judge

Tesla Seeks Shareholder Approval for Elon Musk's $56bn Pay Package

Tesla is requesting its shareholders to once again approve CEO Elon Musk's record-breaking $56 billion pay package that was initially set in 2018. This move comes after a Delaware judge rejected the compensation deal in January, deeming it excessive and stating that the company's board failed to provide sufficient justification for it. The pay package does not include a salary or cash bonus but instead offers rewards based on Tesla's market value reaching up to $650 billion within the next decade. Currently, Tesla is valued at over $500 billion according to LSEG data.

The rejection of Musk's compensation was made by Kathaleen McCormick, a judge in Delaware's court of chancery, who referred to the amount granted by the board as an "unfathomable sum" that was unfair to shareholders. Tesla's request for a new vote appears to be an attempt to garner support for Musk's pay package and publicly challenge the court's decision. The January ruling, which is subject to appeal, nullified what was previously the largest pay package in corporate America.

In a letter included in the regulatory filing, Tesla's board chairperson, Robyn Denholm, expressed disagreement with the Delaware court's decision, stating that it does not align with their understanding of corporate law. This is not the first time McCormick has overseen a case involving Musk; she also presided over Twitter's lawsuit against the entrepreneur in July 2022 when he attempted to break his $44 billion contract to purchase the social media platform.

Musk's compensation for 2023 was revealed to be $0 in the filing. As a billionaire, he does not draw a salary from the company and instead receives compensation through stock options. Tesla suggests subjecting the original 2018 pay package to a new shareholder vote if legally advisable, indicating their desire to obtain approval for the compensation deal.

Additionally, Tesla is urging its investors, through a regulatory filing, to approve the company's decision to relocate its state of incorporation from Delaware to Texas. Before the market opened, shares of Tesla, the world's most valuable automaker, were up by 1%.

Tesla has faced challenges this year, failing to meet market expectations and experiencing a decline in deliveries for the first time in four years. In response to the sales downturn, Musk recently announced layoffs affecting approximately 10% of the company's global workforce, amounting to around 14,000 employees. The overall electric car market has also experienced a slowdown in growth, with major manufacturers like Ford scaling back their plans. Furthermore, Apple laid off 600 employees this month after canceling its multibillion-dollar plan to develop a self-driving electric car.