Tesla To Ask Shareholders To Reinstate Elon Musk’s $56 Billion Package

Tesla shareholders will be asked to vote to reinstate CEO Elon Musk’s $56 billion pay package, months after a Delaware court ruled it was deeply flawed and voided it.

CNBC reported that Tesla said Wednesday it will ask shareholders to reinstate CEO Elon Musk’s $56 billion pay package, as well as approve reincorporating Tesla in Texas.

Delaware judge Kathaleen McCormick in January this year had annulled Elon Musk’s $56 billion pay package that had been granted in 2018, after ruling that Tesla’s board of directors had failed to prove “that the compensation plan was fair” or show much evidence that they had even negotiated with him.

Image credit: Vlad Tchompalov/Unsplash

Pay package

That ruling came after a lawsuit filed by Richard Tornetta, a Tesla shareholder who argued that directors had breached their fiduciary duties by awarding Elon Musk a performance-based equity-compensation plan.”

The pay package that Tesla had granted Musk was the largest compensation plan in public corporate history, the judge noted.

It also allowed Elon Musk to become the world’s richest man.

Musk earlier this year had hit out at the judge’s ruling, saying, “Never incorporate your company in the state of Delaware.”

He then then tweeted a poll that asked the question: “Should Tesla change its state of incorporation to Texas, home of its physical headquarters?”

The poll saw 87.1 percent of respondents vote for Tesla to change its state of incorporation to Texas.

Controversial vote?

Elon Musk began the process of reincorporating both Tesla and SpaceX in Texas, and Tesla has now also said it would ask shareholders to approve moving the company’s incorporation from Delaware to Texas.

CNBC noted that the two proposals (Musk’s pay and Tesla reincorporation in Texas) are likely to be fiercely controversial.

Indeed, according to CNBC Tesla has hired a proxy solicitor, Innisfree M&A, and plans to spend an undetermined amount, in the millions, to help secure the votes for the two proposals.

Tesla has reportedly not hired Innisfree since 2018, when it first asked shareholders to vote on Musk’s pay package. It also noted that Innisfree is also suing Musk’s Twitter over unpaid bills.

Staff layoffs

The vote to reinstate Musk’s huge financial compensation package comes after the EV car giant announced that thousands of staff are to be let go.

Earlier this week Elon Musk in an email to employees, and citing a need for “increasing productivity”, confirmed Tesla is to lay off “more than 10 percent” of its worldwide staff, or around 14,000 people.

“There is nothing I hate more, but it must be done,” Musk said in the email.

The layoffs would “enable us to be lean, innovative and hungry for the next growth phase cycle”, Musk added.

It comes as Tesla faces growing competition in China, as well as slower growth after recording its first annual decline in vehicle deliveries since Covid-19-era disruptions in 2020.

Tom Jowitt

Tom Jowitt is a leading British tech freelancer and long standing contributor to Silicon UK. He is also a bit of a Lord of the Rings nut...

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