CNBC and other sites reported today that Tesla will ask shareholders to approve a $56 billion pay package for celebrity CEO Elon Musk.
Earlier this year, Delaware Chancellor Kathleen McCormick ruled in a shareholder suit that the previously granted package was granted by a board with too many conflicting and profitable ties to Musk. The pay package is tens of times higher than compensation granted to any other CEO of a publicly traded company.
Pay packages are part of proxy materials handed out to shareholders who routinely approve such matters.
Tesla, shareholders will also vote on moving Tesla’s state of incorporation to Texas from Delaware.
Musk was angered by the Chancellor’s decision and declared that Delaware was a bad place to do business. Tesla has no operations in Delaware and simply pays the annual incorporation fee. Musk and Tesla have taken many trips to Chancery Court over the years, with some arguing that the company piles up more court costs than incorporation revenues.
Tesla was also unhappy when McCormick ruled that one of the world’s richest men had to live up to a signed agreement to buy Twitter. Musk claimed the social media company offered flawed information on its finances that voided the agreement.
Twitter’s incorporation was also moved to Texas.
The shareholder vote will be a test of shareholder support for Tesla and Musk, which announced that it would lay off 10% of its global workforce after a grim first quarter that saw vehicle sales below forecasts.
Tesla has run into the headwinds facing electric vehicle makers that have seen a slowdown in sales and is wrestling with questions over why Musk plowed funds into the futuristic Cybertruck, now built in Texas, while not focusing on updating its existing electric vehicles.
Musk has responded with price cuts that are expected to dent the bottom line of the only US company that produces electric vehicles at a profit.
Tesla share prices have skidded, although longtime investors have seen gains over the years.
Musk has touted Tesla as a technology company and not a car company. He recently announced a move into robo taxis without a human driver. Plans by the company for a breakthrough vehicle in the $25,000 range remain unclear
Musk’s arguments regarding Delaware are being used in a $2 million advertising campaign from Philip Shawe, a long-time critic of Chancery Court who moved privately held TransPerfect’s state of incorporation from Delaware to Nevada, due to a lingering controversy over fees generated by the court-supervised sale of TransPerfect.
The sale ended up in Chancery when Shawe and a former fiance could not agree on a buyout of the company, where each controlled a t 50% interest.
