Electric vehicle maker Tesla will ask its shareholders to vote again on a $56 billion compensation package they had approved in 2018 for CEO Elon Musk before it was squashed by a US court earlier this year.
In a filing with federal regulators on Wednesday, Tesla Chair Robyn Denholm said the board of directors stood by the original package and argued that the company's "entrepreneurial spirit" had always been one of "big risks for the chance of big rewards."
Musk's payout -- worth as much as $55.8 billion in 2018 -- was voided in January by a Delaware court, ruling on a complaint by an individual shareholder alleging that Musk had dictated his terms to the board, which was not sufficiently independent from its star CEO.
In the filing with the Securities and Exchange Commission, Denholm expressed the board's continued opposition to the court ruling, insisting it was not how corporate law "should or does" work.
"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."
In a second proposal ahead of the June 13 shareholder meeting, the carmaker asked shareholders to support moving the company's state of incorporation from Delaware to Texas, which "is Tesla's home," Denholm said in the filing.
Layoffs, deliveries down
The proposals come amid a difficult stretch for Tesla, whose shares have fallen 37 percent so far in 2024 compared with a gain of about six percent in the S&P 500 over the same period.
Earlier this week, Tesla announced it would lay off more than 10 percent of its global workforce.
That move comes after Tesla reported a drop in first-quarter auto deliveries in a decline seen as reflective of rising competition among electric vehicle producers and slowing demand growth in some markets.
For Brian Dunn, a lecturer at Cornell University specialized in compensation studies, "no truly independent board would ever grant a package of this size to the CEO of a company that is clearly struggling."
Wedbush analyst Dan Ives chimed in: "The proxy and shareholder meeting combined with the current state of affairs at Tesla all sets up for more fireworks over the coming months."
Ives said in a note that Musk needs to address market speculation that the company is shelving plans for a mass-marketed EV at a lower price point -- a much-anticipated project often referred to as "Model 2."
"We believe no Model 2 rollout in the next 18 months would be a disaster gamble that would likely change the growth story of Tesla the next few years," Ives said.
Shares of Tesla closed down 1.06 percent.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
