Tesla sets the stage for its June 13th shareholder meeting with two key requests in its recently filed proxy statement. The electric vehicle (EV) giant is seeking shareholder approval for a move of its state of incorporation from Delaware to Texas, as well as reinstatement of CEO Elon Musk’s controversial $56 billion pay package, which was rescinded by a Delaware judge earlier in 2024.
In a letter to shareholders, Tesla board chair Robyn Denholm emphasizes the move to Texas aligns with the company’s operational reality. Tesla has had its headquarters in Texas since December 2021, and Denholm argues it’s time to make this official.
“Texas is already our business home, and we are committed to it,” she stated, highlighting 2024 as the year for Tesla to officially relocate its corporate home.
This request follows a Delaware court decision earlier this year that revoked Musk’s pay package. The judge ruled that the board awarding the package did not act in Tesla’s best interests and lacked proper negotiation evidence.
Following the ruling, Musk publicly criticized Delaware as a state for incorporation, recommending Nevada or Texas instead. His preference seems to align with Tesla’s current move.
Denholm, in her letter, justifies reinstating the full 2018 pay package, arguing that Tesla and its shareholders have significantly benefited from Musk’s leadership and achievement of the aggressive goals set within the pay package. 70% of shareholders previously approved the plan.
She further contends that the pay package incentivized Musk to drive innovation by requiring him to hold onto granted shares for five years. However, this detail contradicts Musk’s recent sale of a significant portion of his shares to finance his Twitter (now X) purchase, angering some shareholders.
Analysts like Dan Ives of Wedbush believe shareholders will likely approve the board’s recommendations. He foresees the 2018 package being re-approved and the Delaware court ruling rendered irrelevant due to the move to Texas. However, he anticipates “fireworks” during the meeting, as some shareholders may express concerns about the company’s overall condition.
Proxy advisor firms Glass Lewis and ISS (Institutional Shareholder Services), known for past criticism of Tesla’s board, haven’t issued recommendations on the proposals yet.
Finally, the Tesla board seeks re-election of current directors Kimbal Musk (Elon’s brother) and James Murdoch, along with other proposals to be voted on during the upcoming meeting.
This shareholder meeting promises to be a crucial event for Tesla. The outcome of the votes on Musk’s pay package and the company’s relocation will significantly impact its future trajectory. Whether shareholders prioritize Musk’s leadership and past performance or express concerns about recent actions and governance remains to be seen.
