Tesla wants shareholders to restore Musk's $56 billion pay package thrown out by Delaware judge

DETROIT (AP) — Tesla will ask shareholders to reinstate a $56 billion compensation package for CEO Elon Musk. Rejected by a judge in Delaware This year, the electric car maker will move its corporate home from Delaware to Texas.

In a filing with federal regulators early Wednesday, the company said it will ask shareholders to vote on both issues during its annual meeting on June 13.

In January, Chancellor Kathleen St. Jude McCormick ruled Musk ineligible for a major compensation package awarded by Tesla's board of directors, worth about $55.8 billion over 10 years beginning in 2018.

Five years ago, a Tesla shareholder lawsuit alleged that the pay package should be rescinded because it was dictated by Musk and its product. Mock negotiations With directors he didn't have.

Musk A month after the judge's ruling, he said He will try to move Tesla's corporate listing to Texas, where he has already moved the company's headquarters.

After the judge's ruling, Musk Neuralink did exactly thatHis privately held brain implant company is moving its corporate home from Delaware to Nevada.

In a letter to shareholders this week, Chairman Robin Denholm said Musk delivered on the expected growth at the automaker, with Tesla meeting all stock value and operating targets in the 2018 CEO pay package approved by shareholders.

“Because the Delaware court second-guessed your decision, Elon has not been paid for any of his work for Tesla over the past six years, which has helped generate significant growth and shareholder value,” Denholm wrote. “This strikes us — and many shareholders we've already heard from — as fundamentally unfair and contrary to the wishes of the shareholders who voted for it.”

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Tesla has delivered more than 1.8 million electric vehicles worldwide by 2023, according to a regulatory filing. But the value of its shares has fallen sharply this year Sales of electric vehicles are declining.

With future growth in doubt and growing global competition and fading demand for electric vehicle sales, shareholders may find it challenging to support a fat pay package.

Tesla's shares have lost more than a third of their value this year as massive price cuts have failed to attract more buyers. The Company It delivered 386,810 vehicles from January to March, which is 9% less than the same period last year.

Shareholders will be asked to cast a non-restrictive advisory vote on executive compensation in 2023.

But the proxy statement filed with the Securities and Exchange Commission did not mention Musk's response Must own 25% of Tesla stock He will pursue artificial intelligence and robotics at the company. Currently he owns 20.5% of the company.

In January, Musk challenged the Tesla board to come up with a new compensation package in a post on X, the social media site he now owns. He wrote that if he didn't get 25%, he wanted to develop the product with another company outside of Tesla.

Dan Ives, a Wedbush analyst who is generally bullish on Tesla, said in an interview that many issues, including Musk's future compensation, were not filed.

“It's the elephant in the room because Musk threatened the X, and it's a big overhang for Tesla stock,” Ives said.

Musk, he said, wants to be Tesla CEO for three to five years and develop artificial intelligence with the company. When the company reports first-quarter earnings next week, Ives said Musk should outline plans for future development, including the status of the Model 2, a compact EV that will cost about $25,000. Otherwise dark days will come, he said.

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“Investors aren't just taking Musk at his word,” he said. “There's a sense of the plane crashing into the ocean, and the board is concentrating on their own salty peanuts.”

Musk has less leverage this year than he did in January due to the stock's decline. “She went from Cinderella to A Nightmare on Elm Street in six months,” Ives said.

At the time of the Delaware court ruling, Musk's package was worth more than $55.8 billion, but the company's stock slump this year could have cost the mercurial CEO more than $10 billion in court. Musk's 2018 compensation was reported at $44.9 billion at the close of trading on April 12.

Since last year, Tesla has Reduced prices by up to $20,000 On some models. The price cuts have reduced used electric vehicle values ​​and squeezed Tesla's profit margins.

This week, Tesla said It let 10% of its workers goAbout 14,000 people.

In the filing, Tesla's board said the decision to seek shareholder approval of Musk's 2018 pay package was made by the board after receiving a report from a special committee led by board member Kathleen Wilson-Thompson.

If there are any significant votes against future executive pay packages, “we will consider the concerns of our shareholders, and the compensation committee will evaluate whether any actions are necessary to address those concerns,” the board wrote.

Tesla Inc. fell another 8% this week. Shares fell about 1% on Wednesday.

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Chapman reported from New York. This story has been corrected to clarify that shareholder voting on future executive compensation is advisory only.

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