(April 17): Tesla Inc asked shareholders to vote again on the same US$56 billion (RM268.35 billion) compensation package for chief executive officer Elon Musk that was voided by a Delaware court early this year.
In a proxy filing issued on Wednesday, Tesla also said it will call a vote on moving the company’s state of incorporation to Texas from Delaware. The carmaker will convene its annual meeting on June 13.
Tesla chair Robyn Denholm criticised the Delaware Chancery Court’s January decision, writing in the proxy that it amounted to second-guessing shareholders who had approved Musk’s performance-based award in 2018. Chief judge Kathaleen St J McCormick described the company’s directors as “supine servants of an overweening master”, and said they hadn’t looked out for the best interests of investors.
“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.
The shareholder who sued Tesla over the CEO’s compensation criticised it as excessive and opaque. Musk, who runs six companies, said early this year he preferred to work on artificial intelligence and robotics products elsewhere unless he owns a 25% stake in Tesla. He now owns about 13% of the company.
Tesla shares had risen 1% as of 7.30am in New York on Wednesday, before the start of regular trading. The stock had tumbled 37% this year through Tuesday’s close.
Institutional support
Dozens of institutional shareholders have contacted Tesla and expressed support for the 2018 compensation plan, including four of the top 10, according to the filing. The carmaker also said that thousands of retail investors had sent letters and emails to the board expressing the same sentiment.
Negotiating a new pay package would take time and lead to incurring billions of dollars in additional compensation expense, the filing said. Ratifying the 2018 package will be faster and “avoid a prolonged period of uncertainty regarding Tesla’s most important employee”.
The filing shows Tesla considered nine other states as alternatives to Delaware before narrowing its choice down to California, Nevada, New York or Texas. It settled on the state where it’s headquartered and is home to its newest electric vehicle plant.
“Tesla is all in on Texas,” the company said. “Tesla’s corporate identity is increasingly intertwined with Texas.”
The effort to move Tesla’s incorporation adds to the fallout from the decision to void Musk’s compensation, which has already prompted the CEO to relocate several of his closely held companies. He said in February that SpaceX had filed to move to Texas from Delaware. That came shortly after Neuralink Corp, the brain technology startup founded by Musk, was reincorporated in Nevada.
In a post at the time on his social-media site now known as X, Musk said, “If your company is still incorporated in Delaware, I recommend moving to another state as soon as possible.”
Tesla also will ask investors to re-elect two directors in the upcoming shareholder meeting: Musk’s brother, Kimbal, and James Murdoch, the son of media mogul Rupert Murdoch. Kimbal Musk, a director since 2004, is the longest-serving member of the carmaker’s eight-person board. Murdoch joined in 2017.
The two were among the directors who last year agreed to return more than US$735 million in stock awards and cash to settle an investor lawsuit accusing board members of improperly giving themselves massive compensation packages.