Tesla is requesting shareholders to vote on CEO Musk's 2018 compensation plan at the annual meeting held on June 13th.

In the preliminary shareholder authorization letter submitted to the SEC for 2024, Tesla Chairman Robyn Denholm stated, "I would like to discuss two important proposals here that we believe are crucial for Tesla's future success."

2018 Compensation Program

In 2018, Tesla's board of directors submitted a compensation plan for CEO Musk. The plan mentions that Musk will be granted 12 batches of stock options within ten years, provided that Musk leads Tesla to achieve certain performance goals. At that time, Tesla's shareholders overwhelmingly approved the compensation plan with a percentage of about 73%.

But then a group of Tesla shareholders filed a lawsuit, demanding the court order to block the aforementioned compensation plan.

In January of this year, a judge in Delaware declared the plan invalid, stating that shareholders did not have all the necessary information when they voted to approve the plan in 2018. Meanwhile, the judge pointed out that Tesla's board of directors failed to prove the fairness of the compensation plan, stating that Musk had a close relationship with the company's executives and therefore had bias in formulating the plan.

Now Tesla's board of directors hopes that shareholders can vote on this compensation plan again. Danholm stated that approving Musk's 2018 compensation plan will "restore Tesla's shareholder democracy."

"The 2018 CEO compensation plan requires Elon to achieve transformative and unprecedented growth in order to receive any compensation." Danholm further stated, "Tesla's shareholders have benefited from unprecedented growth under Elon's leadership, and Tesla has achieved every goal of the 2018 CEO compensation plan."

Danholm emphasized that the company's board of directors does not agree with the Delaware court's ruling and believes that the compensation plan is "a fundamental issue of fairness and respect for our CEO."

In the document, Danholm stated that due to post hoc speculation by the Delaware court regarding shareholder decisions, Musk has not been paid for any work he has done for Tesla in the past six years. "This makes us and many of the shareholders we have heard feel unfair and does not align with the wishes of the shareholders who voted in support of it."

Danholm also called on the company's shareholders, saying, "We request that you vote again to approve Elon's 2018 salary plan to express your voice."

Regarding the relocation of the company to Texas, Tesla stated that the company has a large number of manufacturing, operations, and engineering employees in Texas, and the company's executives are also resident in Texas. "Texas is already our home of business, and we are committed to it." Danholm also stated that he has received letters from thousands of Tesla shareholders, big and small, who all support Tesla's relocation back to Texas.

Opponents' claims

Tesla's stock price fell about 1% again on Wednesday, closing at $155.45, with a total market value of $495.1 billion. Since the end of April last year, the company's closing market value has never been lower than $500 billion.

It is reported that at the time of rejection, the above-mentioned compensation plan was worth about $55 billion, but with Tesla's stock price falling, its value has now shrunk to about $47 billion. But this plan remains one of the most lucrative compensation packages in the history of American companies.

Due to the high value of Musk's compensation plan, it has attracted a lot of criticism.

Short sellers such as Jim Chanos jokingly refer to Tesla as a "hope and dream" stock, believing that its success is more based on a fascination with Musk than on fundamentals.

Tesla investor Roger McNamee said in an interview that this was essentially a vote that determined Musk's core position in Tesla, and he believed Musk would ultimately win.

According to Tesla, four of the company's top 10 institutional shareholders have requested a re vote and hinted that they will once again support the plan. The board also stated that after the Delaware ruling, they received information from thousands of shareholders, all of whom stated that they would continue to support the plan.

Dan Ives, an analyst at Wedbush Securities, predicts that the plan will eventually be approved, but he points out that this does not mean the end of Tesla's predicament. "In our view, the midnight bell has already sounded, and Musk now needs to develop a growth strategy, provide realistic delivery and profit targets, discuss why there are large-scale layoffs now, and most importantly, provide a clear outlook to the outside world around Model 2."