Tesla shareholders re-vote on Musk’s pay after court decision

April 18th, 2024

Tesla shareholders will once again vote on Elon Musk’s record-breaking $56 billion pay package after it was voided by a judge.

At the start of the year, Delaware judge Kathaleen McCormick ruled that Musk’s pay compensation package was “unfair” to shareholders in a case brought by Richard Tornetta, who held just nine shares in Tesla when he sued the company in 2018 over Musk’s pay.

This week, Tesla announced in an SEC filing it would ask shareholders to re-vote on Musk’s pay at its 2024 Annual Meeting of Stockholders in June.

In a letter included in the filing, Board Chairperson Robyn Denholm said: “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.

“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 2018, we asked for unbelievable growth and accomplishments. Elon delivered.”

However, even if shareholders vote to approve the pay package, Musk will not automatically receive it, as he must appeal to overturn allegations in the original case that the board did not conduct its full due diligence before making Musk the offer, Reuters reports.

Tornetta’s team argued in the case that the board, which includes Elon Musk’s brother Kimbal Musk, had a duty to offer a smaller pay package or look for another CEO in 2018, and that the agreement should have required Musk to work full-time at Tesla instead of allowing him to focus on other projects, such as SpaceX and X (formerly Twitter).

By seeking the re-vote, the Tesla board is utilising a section of Delaware law that allows companies to ratify actions that are technically defective but not always controversial.