Tesla Wants Shareholders to Approve Elon Musk’s Pay Package. Again.

The fight over Elon Musk’s pay is back.

Tesla’s board asked shareholders to again vote in favor of its CEO’s multibillion-dollar pay package. The board approved the pay proposal in 2018, but a Delaware court in January struck it down because it said the approval process was “deeply flawed.”

The electric-vehicle maker is also seeking to move its incorporation out of Delaware and to Texas, where the company is based.

The moves, released in a filing Wednesday, up the ante over Musk’s pay at a time when Tesla’s shares are sliding and have erased billions of dollars in market value. The automaker’s growth is slowing as the market for electric vehicles cools. And the company is in the midst of cutting 10% of its staff as it recalibrates to lower demand for its cars.

Wednesday’s disclosure also reignites questions over Musk’s close ties to the Tesla board and how it plans to compensate its CEO, a serial entrepreneur with an array of other business interests.

Ahead of its annual shareholder meeting in June, Tesla has proposed that shareholders ratify Musk’s 2018 pay package, which consisted of a 10-year grant of stock options with 12 potential vesting tranches.

The judge in the case, Chancellor Kathaleen McCormick, criticized the process for securing approval of Musk’s compensation, citing Musk’s “extensive ties” with board members and agreed to rescind the his package, which at the time was valued at a maximum of $55.8 billion.

Robyn Denholm, the chair of the board, asked shareholders in a letter released Wednesday to vote to approve Musk’s pay package.

“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,” she 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 said many of its stockholders disagreed with the court’s decision and four of its 10 largest shareholders asked for a meeting with the board chair to discuss the issue.

Courts typically give boards deference on pay decisions, and it is rare for a judge to strike down a compensation deal. But McCormick concluded that Musk’s role as a “superstar CEO,” with an almost 22% equity stake in the company and close ties with the directors, “dominated the process that led to board approval of his compensation plan.” She said Musk and Tesla were unable to prove that shareholders were sufficiently informed about the deal before being asked to approve it.

“In the final analysis, Musk launched a self-driving process, recalibrating the speed and direction along the way as he saw fit. The process arrived at an unfair price,” she wrote.

The case stemmed from a lawsuit filed by a shareholder who argued the pay package should be rescinded, claiming that Tesla’s board of directors breached their fiduciary duties to investors.

Musk is also asking shareholders to approve the company’s corporate conversion to Texas from Delaware. “2024 is the year that Tesla should move home to Texas,” according to the filing. “We have received letters from thousands of Tesla stockholders—large and small—supporting a move home to Texas. We have heard you, and now we formally ask that you speak in a meaningful way: and vote in favor of taking Tesla to our business home of Texas.”

In February, Musk asked Tesla to decide whether to incorporate in Texas. At the time, “The public vote is unequivocally in favor of Texas,” Musk said in a post on X. “Tesla will move immediately to hold a shareholder vote,” he said after conducting a poll on the platform.

Tesla Wednesday asked shareholders to re-elect two directors, Kimbal Musk and James Murdoch, to the board.

Tesla’s upcoming vote comes as the company faces one of the more challenging periods in its history. After years of steady growth as demand for its vehicles took off, the EV market has cooled as interest rates remain higher around the world due to elevated levels of inflation.

Write to Denny Jacob at [email protected] and Alyssa Lukpat at [email protected]

Corrections & AmplificationsChancellor Kathaleen McCormick struck down Elon Musk’s compensation deal in January. A previous version of this article incorrectly said the ruling was from February. (Corrected on April 17)