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Tesla asks shareholders to reinstate Musk's $56 billion pay package, approve move to Texas

Tesla's requests to shareholders come in its latest proxy statement, filed ahead of its June shareholder meeting.

Tesla (TSLA) filed its proxy statement ahead of the EV maker's June 13 shareholder meeting with two big requests: that shareholders vote to move Tesla’s state of incorporation to Texas and that they ratify CEO Elon Musk’s 2018 pay package that a Delaware judge rescinded earlier this year.

In her letter to shareholders in the proxy statement, Tesla board chair Robyn Denholm said the time is right for Tesla to move its corporate home to Texas, where the company has been headquartered since December 2021.

“2024 is the year that Tesla should move home to Texas. We are asking for your vote to approve Tesla’s move from Delaware, our current state of incorporation, to a new legal home in Texas. Texas is already our business home, and we are committed to it,” she said.

The decision to move Tesla’s state of incorporation came after a Delaware chancery court rescinded Musk’s pay package, as the judge found it was awarded to Musk by a board that didn’t act “in the best interests” of Tesla and had “barely any evidence of negotiations at all.” Musk’s 2018 pay package was worth around $56 billion.

Elon Musk attends the Breakthrough Prize awards in Los Angeles, California, U.S., April 13, 2024. REUTERS/Mario Anzuoni
Elon Musk attends the Breakthrough Prize awards in Los Angeles, California, U.S., April 13, 2024. REUTERS/Mario Anzuoni (REUTERS / Reuters)

"Never incorporate your company in the state of Delaware," Musk said on X after the ruling, adding: "I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters."

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As for Musk’s pay package, Denholm wrote that reinstating the full 2018 pay package was the right thing to do.

“In 2018, we asked for unbelievable growth and accomplishments. Elon delivered: Tesla’s stockholders have benefited from unprecedented growth under Elon’s leadership and Tesla has met every single one of the 2018 CEO pay package’s targets,” Denholm said. When the compensation plan previously came up for a vote, over 70% of Tesla shareholders approved it.

Denholm also noted that Musk’s pay package “built in further incentives to benefit Tesla stockholders” by requiring Musk to hold on to any shares he received when exercising his options for five years, claiming Musk would be driven to innovate further if his shares were locked up.

This didn’t stop Musk from selling large quantities of shares he owned prior to the 2018 stock grants that he used to finance his purchase of Twitter (now X), to the ire of many shareholders.

That said, analysts including Dan Ives of Wedbush believe shareholders will vote for the board recommendations.

“On the comp package which was already approved by shareholders at the time in 2018, this has been an area of contention among some investors but we would expect the 2018 package will be reapproved and the Delaware court ruling would be moot in essence as Tesla will now be moving to Texas,” he wrote in a note Wednesday morning, adding that he does expect some “fireworks” during the June meeting, with investor concerned about the overall condition of the company.

Proxy adviser firms Glass Lewis and ISS (Institutional Shareholder Services) have not yet recommended whether shareholders should vote for or against the latest proposals, though the two firms have been critical of Tesla's board in the past.

Finally, the Tesla board is asking shareholders to reelect current directors Kimbal Musk (Elon’s brother) and James Murdoch, among other proposals up for a vote at this year's meeting.

Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.

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