Elon Musk attends the premiere of “Lola” held at the Regency Bruin Theater in Los Angeles, California, USA on February 3, 2024.
Ode Gallucci Reuters
Tesla Plan requires shareholders recover Earlier this year, a Delaware court invalidated a record stock grant, describing it as “seriously flawed,” followed by CEO Elon Musk’s $56 billion in compensation starting in 2018.
The company announced the move in a preliminary agency filing on Wednesday, days after telling employees it would lay off 10% of its employees.
Tesla said the court’s decision raised “fundamental questions” for the company. As a result, Tesla also plans to ask shareholders to let the company move its domicile from Delaware to Texas, something Musk has threatened to do following an adverse court ruling.
Both proposals are likely to be hotly contested. Tesla has hired Innisfree M&A attorneys and plans to spend millions of dollars to help secure votes for both proposals, according to the filing.
Tesla has not hired Innisfree since it first asked shareholders to vote on Musk’s compensation package in 2018. Companies typically only publicize the cost of proxy solicitations when they anticipate a major proposal or proxy fight.
Musk’s pay package came after a shareholder won a lawsuit against the company earlier this year. Delaware Chancery Court President Kathalen McCormick found that Musk, not Tesla’s board, controlled the company and that the board’s compensation committee did not negotiate terms of the deal with Musk , but “working with him, almost as a consultancy”.
Tornetta’s decision prompted Musk to say: “Never register your company in Delaware.”
Tesla, in Wednesday’s filing, expressed doubts about the decision by McCormick, who has been involved in some of Musk’s other legal dealings. “The company and the board of directors believe in this decision tonetta Tesla said in agency filings that the Delaware court ignored important evidence presented at trial and made factual errors and erroneous legal conclusions.
The company also noted that “dozens of institutional shareholders” have told Tesla they disagree with Tornetta’s decision.
Delaware has long been a top location for businesses—more than 60 percent of Fortune 500 companies are registered here—because the state has a robust legal framework and court system dedicated to resolving corporate issues such as executive compensation , as well as broader contract negotiations.
Tesla’s new proposal reminds shareholders that a Delaware court found their original 2018 disclosure to be flawed and urges them to read the full text of the decision.
In January, on the same day the pay package was rejected, Musk asked his X followers whether Tesla should re-register the company in Texas. Months later, Tesla’s board is now asking shareholders to approve their answer to that question.
This is breaking news. Please check back for updates.
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