Tesla to ask shareholders to reinstate $55 billion pay package for Musk rejected by Delaware judge

FILE – Tesla CEO Elon Musk leaves the Tesla Gigafactory for electric cars after a visit in Gruenheide near Berlin, Germany, on March 13, 2024. Elon Musk will ask Tesla shareholders to reinstate the compensation package that was rejected by a judge in Delaware this year and to move the electric carmaker’s corporate home from Delaware to Texas. (AP Photo/Ebrahim Noroozi, File)

AUSTIN, Texas (AP) — Tesla will ask shareholders to reinstate a $55 billion compensation package for CEO Elon Musk that was rejected by a judge in Delaware this year and to move the electric car maker’s corporate home from Delaware to Texas.

FILE – An 2023 Model X sits outside a Tesla dealership on June 18, 2023, in Englewood, Colo. After reporting dismal first-quarter sales, Tesla is planning to lay off about a tenth of its workforce as it tries to cut costs, multiple media outlets reported Monday. (AP Photo/David Zalubowski, File)

In a filing with federal regulators early Wednesday, the company said it would ask shareholders to vote on both issues during its annual meeting in June.

In January, Chancellor Kathaleen St. Jude McCormick ruled that Musk is not entitled to a landmark compensation package awarded by Tesla’s board of directors that is potentially worth more than $55 billion.

Five years ago, a Tesla shareholder lawsuit alleged that the pay package should be voided because it was dictated by Musk and was the product of sham negotiations with directors who were not independent of him.

Musk said a month after the judge’s ruling that he would try to move Tesla’s corporate listing to Texas, where he has already moved company headquarters.

Almost immediately after the judge’s ruling, Musk did exactly that with Neuralink, his brain implant company, moving its corporate home from Delaware to Nevada.

In a letter to shareholders this week, Chairperson Robyn Denholm said that Musk has delivered on the growth it was looking for at the automaker, with Tesla meeting all of the 2018 CEO pay package targets.

FILE – Tesla CEO Elon Musk waves as he leaves the Tesla Gigafactory for electric cars after a visit in Gruenheide near Berlin, Germany, March 13, 2024. After reporting dismal first-quarter sales, Tesla is planning to lay off about a tenth of its workforce as it tries to cut costs, multiple media outlets reported Monday. (AP Photo/Ebrahim Noroozi, File)

“Because the Delaware Court second-guessed your decision, Elon has not been paid for any of his work for Tesla for the past six years that has helped to generate significant growth and stockholder value,” Denholm wrote. “That strikes us — and the many stockholders from whom we already have heard — as fundamentally unfair, and inconsistent with the will of the stockholders who voted for it.”

Tesla made and delivered more than 1.8 million electric vehicles worldwide in 2023, according to a regulatory filing. But its shares have lost about one-third of their value so far this year as sales of electric vehicles soften.

Yet Tesla sales are now falling sharply and it may be a challenge to get shareholders to back a fatter pay package in an environment where competition has increased worldwide and demand for electric vehicle sales is fading. Massive price cuts at Tesla have failed to draw more buyers. The company said it delivered 386,810 vehicles from January through March, nearly 9% fewer than it delivered in the same period last year.

FILE – A Tesla logo has rain drops on it Feb. 27, 2024, in Charlotte, N.C. After reporting dismal first-quarter sales, Tesla is planning to lay off about a tenth of its workforce as it tries to cut costs, multiple media outlets reported Monday. (AP Photo/Chris Carlson)

Since last year, Tesla has cut prices as much as $20,000 on some models. The price cuts caused used electric vehicle values to drop and clipped Tesla’s profit margins.

This week, Tesla said it was letting about 10% of its workers go, about 14,000 people.

Tesla will hold its annual shareholders meeting on June 13.