The Delaware court invalidated the compensation deal based on the carmaker’s market value in January, describing it as an “unfathomable sum.”
On Wednesday, Tesla requested its shareholders to once more endorse CEO Elon Musk’s record-breaking $56 billion compensation, which was initially established in 2018. A Delaware judge dismissed the pay package in January, deeming it excessive and criticizing the company’s board for failing to justify it.
The compensation package includes no salary or cash bonus but offers rewards based on Tesla’s market value rising to as much as $650 billion over the next 10 years. Tesla is currently valued at over $500 billion, according to LSEG data.
Kathaleen McCormick of Delaware’s court of chancery rejected Musk’s pay, describing the board’s compensation as “an unfathomable sum” that was unfair to shareholders.
The company’s request for a new vote appears to be an effort to garner more support for Musk’s pay package and to publicly contest the court’s decision. The January ruling, which is subject to appeal, invalidated the largest pay package in corporate America.
“We disagree with the Delaware court’s decision, and we do not believe that it reflects the principles of corporate law,” stated Robyn Denholm, the board chairperson, in a letter included in the regulatory filing.
McCormick also presided over Twitter’s lawsuit in July 2022 against Musk when he attempted to terminate his $44 billion contract to purchase the social media platform.
Musk’s compensation for 2023 was $0, as indicated in the filing. The billionaire does not receive a salary from the company and is remunerated through stock options.
“If legally feasible, we propose simply submitting the original 2018 package to a new shareholder vote,” Tesla stated in its filing.
The electric vehicle manufacturer also urged its investors in a regulatory filing to approve its decision to relocate the company’s state of incorporation from Delaware to Texas.
Shares of the world’s most valuable automaker rose 1% before the market opened.
Tesla has faced challenges this year, falling short of market expectations and reporting a decline in deliveries for the first time in four years. Musk announced earlier this week that the company would be reducing its global workforce by about 10%, affecting approximately 14,000 employees, due to the decline in sales.
The overall electric car market has experienced a slowdown in growth in recent months, with major manufacturers like Ford scaling back their plans. Additionally, Apple laid off 600 employees this month after abandoning its multibillion-dollar plan to develop a self-driving electric car.