Tesla (Nasdaq: TSLA) shareholders have a bigger agenda than usual ahead of this year’s shareholder meeting in mid-June. The EV maker’s board of directors has asked investors to vote on two important issues: incorporating Tesla in Texas and ratifying CEO Elon Musk’s incentive-based performance award.

These proposals arose in response to a frosty reception from the state of Delaware, where Tesla is currently incorporated and where a court decided that Musk’s pay incentives for the 2018-2028 stretch were too high (once he started hitting targets) and canceled them.

As a result, Musk technically hasn’t received a dime in pay from his job as CEO in six years. Based on social media scuttlebutt, investors are mostly supportive of the company’s initiatives. But Leo KoGuan, one of Tesla’s biggest and most conflicted investors, urged fellow shareholders to “just vote no” to the proposals.

Tesla Chair Robyn Denholm sent a video message to shareholders in which she touted Musk’s accomplishments over the past five years. She detailed how the state of Delaware has been a thorn in the side of Tesla, urging investors to support a pair of proposals that are “critical to fuel Tesla’s future growth” and the stock value.

Elon’s Compensation

Tesla’s board wants shareholders to reapprove a 2018 CEO performance award so he can be paid. Shareholders already overwhelmingly green-lighted this measure six years ago, which outlined incentives for Musk as the company achieved ambitious milestones over the coming decade. Denholm said that even a few years ago, “these targets seemed so farfetched…that the skeptics called them laughingly impossible.” If the naysayers would have been right, and Musk failed to deliver, he would have been entitled to zero salary, bonuses or equity.

But Musk has a way of proving critics wrong, which is precisely what he did over the past five years by hitting targets, entitling him to lucrative benefits early. Among the milestones, Tesla grew revenue from $11.8 billion to $96.8 billion while also swinging to a profit of $15 billion. Tesla’s market cap reached almost $790 billion at year-end 2023. While its value has since fallen to $567.2 billion, Tesla’s worth still surpasses  that of other major corporations like Visa (NYSE: V), JPMorgan (NYSE: JPM), ExxonMobil (NYSE: XOM) and Walmart (NYSE: WMT) as its innovation in areas like AI and self-driving advance.

Denholm noted that Elon’s awards align incentives with shareholders, considering he must continue holding awarded stock options for five years.

Reincorporate Tesla in Texas

In 2021, Tesla relocated its headquarters to Austin, Texas, but the company is still incorporated in Delaware. Given the First State’s tense dealings with the EV maker, in addition to shareholder letters to Tesla urging a relocation, Tesla’s board wants to make its presence in the Lone Star State official.

The company’s biggest giga factory, Giga Texas, reportedly employs over 22,000 people in the state. By becoming incorporated there, Tesla’s board would operate under what it feels is a “strong and fair” legal system for corporations. Delaware, on the other hand, has proven its disregard for shareholders by overriding their approval of Musk’s compensation package.

Tesla Stock Roller Coaster

Investors are faced with a Tesla stock price that has declined nearly 30% year-to-date amid a wave of layoffs and other cost-cutting measures, including EV price cuts. Musk has emphasized the role autonomous driving technology will play in Tesla’s future, even making a trip to Beijing to ensure the EV maker’s role in this competitive market. He believes the Tesla share price should reflect the company’s role in the autonomous driving technology of the future. Tesla stock came close to $200 around the time of Musk’s China trip but has since retreated.

Additionally, evidence has surfaced that Tesla may have expanded a pilot program involving its semi-trucks, originally made for PepsiCo (Nasdaq: PEP). Videos have surfaced of the trucks being delivered to big-box retailers Walmart and Costco (Nasdaq: COST) in California. Tesla reportedly plans mass production of its Class 8 semi-truck by the end of next year.

Incidentally, Denholm, who has been serving as Chairwoman for the EV maker since 2018, has been unloading Tesla holdings this year. According to an SEC filing, she sold over 93,000 shares this month, amounting to approximately $17.3 million. The selling was part of an agreement made between the chairwoman and the company back in October, one that she maximized to deplete the shares that were included in the program.

But Denholm still owns most of the 1.66 million TSLA shares underlying options awards she held in her portfolio as of Dec. 31, 2023, more than any other non-employee director, according to the filing.

Meanwhile, Wall Street analysts are mostly split on Tesla stock, with an average price target of $173, according to Tipranks. Cantor Fitzgerald is among the bulls, having recently initiated coverage with an “overweight” rating and price target of $230, reflecting 30% upside in in the stock.

While Tesla shares might have gotten off to a slow start in 2024, they have gained over 900% over the past five years.

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