Tesla puts Elon Musk $56 billion pay to shareholder vote

Tesla stated Wednesday it’ll ask shareholders to reinstate CEO Elon Musk’s $56 billion pay bundle, which a Delaware choose voided earlier this yr after ruling that the record-setting compensation deal was “deeply flawed.”

Tesla additionally stated it could ask shareholders to approve transferring the corporate’s incorporation from Delaware to Texas. Musk had prompt the transfer after his pay bundle was dominated unlawful. The announcement Wednesday got here days after the automaker stated it could lower its workforce by 10%.

Tesla stated the courtroom choice created a “elementary downside for the corporate.”

The 2 proposals are prone to be fiercely controversial. Tesla has employed a proxy solicitor, Innisfree M&A, and plans to spend an undetermined quantity, within the tens of millions, to assist safe the votes for the 2 proposals, in response to the submitting.

Tesla has not employed Innisfree since 2018, when it first requested shareholders to vote on Musk’s pay bundle. Firms typically solely promote the price of proxy solicitations when main proposals or proxy fights are anticipated. (Innisfree was additionally suing Musk’s Twitter over unpaid payments.)

Musk’s pay bundle was invalidated after a shareholder received a lawsuit towards the corporate earlier this yr. Delaware Chancery Court docket Chancellor Kathaleen McCormick discovered that Musk, slightly than Tesla’s board, managed the corporate and that the board’s compensation committee, slightly than negotiating with Musk over the phrases of the deal, “labored alongside him, nearly as an advisory physique.”

The Tornetta choice, named after Tesla shareholder Richard Tornetta who introduced the swimsuit, prompted Musk to say, “By no means incorporate your organization within the state of Delaware.”

McCormick was additionally the presiding choose within the authorized motion compelling Musk to purchase Twitter, which he renamed. Tesla, in its Wednesday submitting, forged doubt on her choice. “The Firm and the Board imagine that the choice in Tornetta ignored materials proof offered at trial and that the Delaware Court docket made errors of truth and incorrect conclusions of legislation,” Tesla stated within the proxy submitting.

The corporate additionally famous that “dozens of institutional stockholders” have informed Tesla that they disagree with the Tornetta choice.

Delaware has lengthy been a most well-liked dwelling for companies — greater than 60% of the Fortune 500 corporations are included there — as a result of the state has a sturdy authorized framework and courtroom system devoted to resolving company points, like govt pay, but in addition broader contract negotiations.

Tesla’s new proposal cautions shareholders that the Delaware courtroom discovered the corporate’s preliminary 2018 disclosures to be poor, and urged them to learn the complete textual content of the choice.

In January, the identical day the pay bundle was rejected, Musk requested his X followers if Tesla ought to reincorporate in Texas. Months later, Tesla’s board agreed and is now proposing the transfer to Texas and asking shareholders to approve the transfer.

Tesla linked the Delaware choice on to its proposal, however it stated that each Elon Musk and his brother Kimbal Musk, who additionally sits on Tesla’s board, recused themselves from deliberations.

The corporate stated that Tesla’s “dwelling and future are in Texas” and that the board thought of each U.S. state earlier than narrowing it all the way down to a head-to-head comparability between Delaware and Texas, Musk’s public feedback however.

Tesla additionally defends the transfer as commonplace, saying that 35% of S&P 500 corporations aren’t included in Delaware. The corporate acknowledged Delaware’s courtroom system as world class, however stated “doing new issues is a part of Tesla’s DNA, and the way it has grow to be one of the crucial invaluable corporations on the earth.”

— CNBC’s Lora Kolodny and Dan Mangan contributed to this report.