Elon Musk is suing Tesla over his salary



Washington, DC
CNN

Tesla CEO Elon Musk testified this morning in a shareholder lawsuit examining the massive compensation package that helped make him the world’s richest man.

Tesla is being sued by plaintiff Richard J. Tornetta, who says the company made a mistake in setting Musk’s compensation package in 2018, which shareholders approved at the time. Tesla said at the time that it could be worth about $56 billion, and today it has a net worth of $50.9 billion.

Musk appeared in Delaware Chancery Court in Wilmington shortly after 9:00 a.m. Musk’s testimony included “working long hours at a high intensity,” giving employees an ultimatum to be “extremely tough” overnight while asserting his control over Twitter. ,” or leave the company.

Musk began the day under questioning from his defense attorney and the plaintiff’s attorney, where he was asked about his management of Tesla and his time at the company, as well as his relationship with the board, which is believed to be independent of Musk. represents the shareholders. Musk acknowledged his friendship with board members, including some shared family vacations. Under questioning, Musk defended himself by saying he supports Tesla’s mission to increase its market value, but acknowledged that he sometimes does not seek board approval for public statements.

The lawsuit alleges Musk’s massive pay package is unjust enrichment and claims the board failed in its legal duty to act in the best interests of Tesla shareholders. The suit describes Musk as a “part-time CEO” as he leads other businesses. One of the points of contention in the case is whether Tesla’s board is truly independent of Musk and represents shareholders, or whether he has undue influence over his board to pay him such a large salary.

Musk himself controls more than 20% of all outstanding Tesla stock, including unexercised options.

Musk initially denied on Thursday that he was negotiating against himself over how much of his share of the pay package he would receive. (Negotiation against himself would essentially give Musk total control over the outcome and raise big questions about the board and whether it fulfilled its fiduciary responsibilities.)

But the plaintiff’s attorney, Gregory Varallo, later echoed some of Musk’s remarks about the pay package at one point: “I guess it’s me negotiating against myself.”

Musk later admitted that he had said it. It was one of several occasions in which Varallo highlighted inconsistencies in Musk’s current and previous statements.

Less than three minutes into the inquiry, Musk said he believed the board had been consulted before the name was changed to “Technoking.”

Varallo later echoed what Musk said he did not consult with the board about the title change.

Musk said in repeated testimony in court Wednesday that he was the one who laid out the vision for Tesla.

But in court Wednesday, Musk struck a different tone and objected to the question being asked in a yes-no format.

“I believe you are asking complex questions where yes or no is possible. Yes, it’s more accurate than not,” Musk said Wednesday. “But your question is a complicated question used to confuse people.”

Varallo emphasized Musk’s degree of control over Tesla.

Musk said he did not seek confirmation when he recently announced a potential stock purchase. He also said he saw a path to becoming more valuable than Apple and Saudi Aramco, two of the world’s most valuable companies, and said he did not seek confirmation.

The plaintiff’s attorneys this week described the package as costing close to the gross domestic product of the entire state of Delaware and far more than the construction of the World Trade Center. They also compared Musk’s compensation to Tesla’s average salary, which they say is $40,000.

As the court focused on Musk’s compensation, attorneys for the plaintiffs raised various questions about his management of Tesla. Musk took issue with the question while tweeting about Tesla.

“We’re cross-examining an interesting case, Mr. Musk,” Varallo replied. “So when your lawyer wants to object, he has the right to do so, but unfortunately you don’t. If he doesn’t like the question, I doubt he will.”

The exchange led Musk to reiterate his criticism of the SEC.

“The consent decree was made under duress,” Musk said WednesdayCiting a 2018 settlement with the SEC over allegations that Musk “financed” Tesla to take it private for $420 a share. “A contract concluded under duress is not valid as a basis of law.”

At a TED conference earlier this year, Musk said he agreed to the deal only because he would have stopped funding Tesla at a time when its banks needed cash if he continued to fight the SEC. “I had to [to lie] To save Tesla’s life and that’s the only reason,” Musk said at the April event.

Then Varallo He asked if Musk had any legal training. Musk described some dating.

“If you’re in enough litigation, you’re going to pick up a few things along the way,” Musk said.

Tesla executives have defended Musk’s pay package in two days of testimony so far.

“It motivated him to achieve bold and daring things, and he devoted his time and energy to it, unlike his other interests,” Tesla chairman Robyn Denholm said in a statement Tuesday. Musk said he was interested in funding interplanetary travel. In addition to Tesla, Musk is CEO of SpaceX and owner of Twitter, heads the Boring Company, which specializes in underground tunnels, and is the founder of Neuralink, which is trying to implant computer chips in people’s brains.

Musk’s compensation package goals were characterized as lofty and incredibly difficult to achieve.

Former Tesla Chief Financial Officer Deepak Ahuja described the plan as “extremely high-risk, high-reward.”

“Although I believe deeply in Tesla, I felt that the difficulty level of these milestones was so high that for a layman like myself, I did not see it as an attractive incentive plan on a personal level,” Ahuja said.

According to emails read in court by the plaintiff’s attorneys, Musk pushed shareholders to approve the plan by warning that he was “very hurt” by the lack of support and that those who opposed it would not be welcome at any company.

Chris Isidore contributed to this story.



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