Tesla Wants to Reapprove $56 Billion Salary for Elon Musk After a Court Decision Called it 'Flawed'

By Thea Felicity

Apr 17 2024, 09:58 AM EDT

LOS ANGELES, CALIFORNIA - APRIL 13: Elon Musk attends the 10th Annual Breakthrough Prize Ceremony at Academy Museum of Motion Pictures on April 13, 2024 in Los Angeles, California. Kevin Winter/Getty Images

Tesla is seeking shareholder approval to reinstate CEO Elon Musk's staggering $56 billion pay package, according to CNBC. This move comes after a Delaware court's ruling earlier this year, which deemed the compensation deal deeply "flawed" and consequently voided it.

Alongside this proposal, Tesla is also pushing for relocating its incorporation from Delaware to Texas, a decision it claims is a direct consequence of the court's judgment.

The fallout from the court decision has ignited a firestorm within the company, with Musk publicly expressing his disdain for the ruling and the company's continued incorporation in Delaware. However, Tesla's board asserts that these decisions were made independently.

The company's announcement of these proposals coincides with recent news of a workforce reduction by 10%, signifying a change in Tesla's future trajectory.

Plans to Reaffirm Tesla's Proposals

Tesla, bracing for resistance, has hired Innisfree M&A to gather support for its controversial proposals, a noteworthy decision following their collaboration in 2018 over Musk's pay package. The legal dispute over Musk's compensation originated from a shareholder lawsuit, resulting in Chancellor Kathaleen McCormick of the Delaware Chancery Court voiding the package due to governance and oversight concerns.

The decision, dubbed the "Tornetta ruling" after shareholder Richard Tornetta, prompted Musk to condemn Delaware as a jurisdiction for corporate incorporation publicly. Tesla's Wednesday filing challenges the legitimacy of McCormick's decision, alleging errors of fact and law.

Despite this legal setback, Tesla is steadfast in its determination to push forward, citing its belief that Texas offers a more conducive environment for its corporate future.

While controversial, the proposal to relocate to Texas is backed by the assertion that 35% of S&P 500 companies are not incorporated in Delaware, emphasizing Tesla's desire to chart its own course.

While Delaware has historically been a preferred destination for corporate entities due to its robust legal framework, Tesla sees Texas as a beacon for innovation and a better fit for its "pioneering spirit."