Elon Musk is concentrating on Twitter as the trial for his $56 billion Tesla payment is underway
Tesla shareholder is attempting to have Musk’s 2018 pay arrangement revoked on the grounds that the board of directors established lax performance goals and that Musk put together the package to pay for his desire to colonise Mars.
Elon Musk is heading to court to defend his record $56 billion Tesla Inc compensation package against charges that it unfairly benefits him without necessitating his full-time presence at the carmaker while the entrepreneur is consumed with his makeover of Twitter.
Tesla shareholder is attempting to have Musk’s 2018 compensation agreement revoked on the grounds that the board of directors established lax performance goals and that Musk built the package to support his plan to colonise Mars.
The package, according to Tesla, gave stockholders an exceptional 10-fold gain in value.
On the Court of Chancery of Delaware, Kathaleen McCormick will preside over the trial, which starts on November 14. She managed Twitter’s litigation against Musk, which was settled last month when he agreed to finalise his $44 billion acquisition of Twitter, which he partly funded with shares of Tesla.
According to Ann Lipton, a professor at Tulane Law School, “If Musk loses this pay package in some big way, I think we should expect to see a number of things that are going to be incredibly hard to forecast, including what happens going forward in terms of how Tesla is operated and how Twitter is paid for.”
The lawsuit brought by Tesla shareholder Richard Tornetta, however, is expected to be significantly more challenging than Twitter’s case against Musk, according to Lipton and other legal experts.
In addition to founding or co-founding Neuralink, which manufactures brain implants, the tunnelling company The Boring Co., and the artificial intelligence research facility OpenAI, Musk built SpaceX, one of the most valuable private firms in the world, and serves as its CEO. He made himself the CEO of Twitter last week.
The 2018 package, according to Tornetta’s attorneys, failed to accomplish its stated goal of focusing Musk on Tesla. They describe Musk as a “part-time CEO,” citing his testimony that in 2018, he worked Monday and Thursday at SpaceX and Tuesday, Wednesday, and Friday at the electric vehicle manufacturer, according to his deposition.
Robyn Denholm, the chair of Tesla’s board, allegedly wrote to Gabrielle Toledano, who was the company’s chief people officer at the time in 2018, that Musk’s “minimum time” at Tesla was “becoming more and more troublesome.”
The business claims that the package wasn’t intended to have Musk punch a clock and work a set number of hours each week but rather to achieve “audacious” goals that would benefit both Musk and stockholders like Tornetta.
The contentious compensation plan permits Musk to purchase 1% of Tesla’s stock at a significant discount each time he meets increasing performance and financial goals; if not, he receives nothing. As its worth increased from $50 billion to $650 billion, Tesla has achieved 11 of the 12 goals.increased the manufacture of the Model 3 according to court documents.
Amit Batish at the executive compensation analysis firm Equilar estimates that Musk’s vested grants are worth about $50 billion. The awardscontribute to the richest fortune in the world—his $200 billion fortune.
The trial will likely centre on Tornetta’s allegations that Musk-aligned directors devised and authorised the package and pushed it to shareholders without disclosing that the initial tranches were likely to be met based on internal projections.
There are numerous instances of boards that Musk controls in Tornetta’s filings.
For instance, Antonio Gracias, who the plaintiff referred to as Musk’s close friend and who served as lead independent director from 2010 to 2019, stated in his 2021 deposition that the board had no power to prevent Musk from selling Tesla if he so desired.
Who had a staff member? Minor Myers, a professor at the UConn School of Law, questioned whether Elon Musk worked for the board or the board for Elon Musk.
Myers claimed that if the compensation arrangement is revoked, the board could easily come up with a new one using McCormick’s decision as a reference.
However, the situation has altered, making the process more difficult.
He currently owns Twitter. How do they want to account for that?” Myers asked, adding that it will be difficult to prevent Musk from getting sidetracked by other endeavours.
He asked, “How much cash do they have to throw in front of this guy to gain his attention?”