Judge rejects Tesla’s proposal for $56 billion pay package for Musk sought by shareholders

Tesla to Ask Shareholders for $56B Pay Package for Musk

AUSTIN, Texas — In a move aimed at addressing CEO Elon Musk’s compensation package, Tesla will seek shareholder approval to reinstate a controversial $56 billion pay package that was rejected by a Delaware judge earlier this year. Additionally, the electric car maker is proposing to relocate its corporate headquarters from Delaware to Texas.

The rejected compensation package, which was valued at approximately $55.8 billion over a 10-year period starting in 2018, was deemed invalid by Chancellor Kathaleen St. Jude McCormick in January. The judge ruled that the package, initially awarded by Tesla’s board of directors, was influenced by Musk and lacked independence from him.

Musk, who has already moved Tesla’s corporate headquarters to Texas, has expressed his intention to relocate the company’s listing to the Lone Star State. Following the judge’s decision, Musk successfully shifted the corporate home of Neuralink, his brain implant company, from Delaware to Nevada.

Despite the legal setback, Tesla has continued to deliver impressive results, including record deliveries of over 1.8 million electric vehicles worldwide in 2023. However, the company’s stock value has faced challenges this year as global competition in the electric vehicle market intensifies and demand softens.

Tesla’s recent struggles have prompted significant price reductions on certain models, impacting profitability and leading to layoffs of approximately 10% of its workforce. The company’s stock has also experienced a significant decline, losing more than one third of its value this year alone.

Moving forward, shareholders will have the opportunity to cast a non-binding advisory vote on future executive compensation, signaling potential concerns about the sustainability of high pay packages amid market uncertainties. A special committee established by Tesla’s board will evaluate shareholder feedback and determine appropriate actions based on the outcome of the vote.

It remains to be seen how shareholders will respond to Tesla’s proposal for Musk’s compensation package, given the company’s recent financial challenges and evolving market dynamics. As Tesla navigates these changes, careful consideration of executive pay structures will be essential to ensure alignment with shareholder interests and long-term sustainability.