Tesla (TSLA) will ask shareholders to ratify CEO Elon Musk’s record compensation package months after it was struck down in a Delaware court, according to a proxy statement filed on Wednesday (April 17). The electric vehicle maker will also ask shareholders to approve changing its incorporation from Delaware to Texas following the January ruling against Musk’s record pay package. The radical pay package, initially proposed in 2018 and worth more than $55 billion, would have given Musk the right to purchase up to 304 million shares of Tesla stock at a pre-ordained price of $23.34 as long as he met a series of agreed-upon financial achievements. If he failed to meet the requirements, he would make nothing. At its annual meeting in June, Tesla will ask shareholders to vote on the same pay package, now worth around $47 billion. The arrangement was initially voided in January after Delaware Chancellor Kathaleen McCormick ruled that Tesla’s directors breached their fiduciary duties when they granted Musk the highest pay ever awarded to a public corporate executive with “barely any evidence of negotiations at all.”
“Musk was the paradigmatic ‘Superstar CEO’ . . . and dominated the process that led to board approval of his compensation plan,” McCormick wrote, noting that the billionaire executive exercised an outsize influence over the board despite holding just a 22 percent stake in Tesla. The court order came as a major blow to Musk, who is raising billions for xAI, his artificial intelligence start-up launched last year to challenge the dominance of ChatGPT developer OpenAI. When first proposed in 2018, Musk’s $55 billion pay package was around 33 times larger than the billionaire’s compensation deal struck in 2014—which still holds the record for the largest pay deal in history, according to Tesla shareholders’ attorney Greg Varallo.
In comparison, Peter Rawlinson, CEO of rival electric vehicle maker Lucid Motors, was the highest-paid automotive executive in 2022, with a total compensation package of $379 million, according to the most recent annual survey by Automotive News and data firm Equilar. General Motors chief Mary Barra came in second with a total pay package of $429 million. Because he awarded himself a $0 salary that year, Musk was not included in the survey. However, Musk realized a gain of more than $23 billion in Tesla stock options due to expire in 2022.
Tesla’s appeal to shareholders comes days after Musk disclosed in a company-wide memo that it plans to lay off 10 percent of its workforce after scaling back production in its Shanghai and Austin factories. Tesla has been battling waning demand for electric vehicles. The group’s first-quarter delivery numbers significantly missed Wall Street expectations, and quarterly sales fell for the first time since the onset of the global pandemic in 2020.
