While Musk focuses on Twitter, his $56 billion Tesla salary is being litigated


WILMINGTON, Del., Nov 7 (Reuters) – As Elon Musk overhauls Twitter, the entrepreneur is on trial to defend his record $56 billion Tesla Inc pay package against claims he unjustly enriched him without requiring full-time work. presence in the car manufacturer.

A Tesla ( TSLA.O ) shareholder wants to void Musk’s 2018 pay contract, claiming the board set easy performance targets and created the package to fund Musk’s dream of colonizing Mars.

Tesla countered that the package gave shareholders an extraordinary 10 times its value.

The trial begins on November 14 and will be decided by Kathaleen McCormick in the Delaware Court of Chancery. He oversaw a lawsuit against Musk that ended with Twitter agreeing to close a $44 billion deal last month, largely funded by Tesla stock.

“If Musk loses this pay package massively, I think we’re going to see a lot of things that are going to be really hard to predict in the future in terms of how Tesla is run and how Twitter is paid,” Tulane Law School professor Ann Lipton said.

However, Lipton and other legal experts said Tesla shareholder Richard Tornetta’s lawsuit would be more difficult than Twitter’s lawsuit against Musk.

Musk founded and is the CEO of SpaceX, one of the world’s most valuable private companies, co-founded or co-founded Neuralink, which develops brain implants, tunneling The Boring Co, and artificial intelligence research lab OpenAI. Last week, he appointed himself CEO of Twitter.

‘PART-TIME CEO’

Tornetta’s lawyers argue that the 2018 package falls short of Musk’s goal of focusing on Tesla. They describe Musk as a “part-time CEO,” citing his statement that he worked Tuesdays, Wednesdays and Fridays at the electric car maker and Mondays and Thursdays at the rocket company SpaceX in 2018.

Tesla chairman Robyn Denholm allegedly told Gabrielle Toledano, then Tesla’s Chief People Officer, in a 2018 email that Musk’s “minimum amount of time” at Tesla was increasingly problematic.

The company argues that the package is not about requiring Musk to punch the clock and be on site at certain times each week, but to hit “bold” targets that enrich Musk as well as shareholders like Tornetta.

The controversial pay package allows Musk to buy 1% of Tesla stock at a deep discount every time incremental performance and financial targets are met; otherwise Musk gets nothing. According to court documents, Tesla hit 11 of 12 targets as the Model 3 increased its value from $50 billion to $650 billion as a result of increased production.

Musk’s grants are worth about $50 billion, according to Amit Batish at Equilar, an executive pay research firm. Grants contribute to his $200 billion fortune, the world’s largest fortune.

Musk’s stock grant package is more than six times the combined pay of the 200 highest-paid CEOs last year, according to Batish.

The trial is likely to focus on Tornetta’s claims that the package was drafted and approved by directors belonging to Musk and presented to shareholders without disclosing whether the first tranches were likely to meet internal projections.

LORTA CONTROL

Tornetta’s filings are replete with examples of Musk-led boards.

For example, Antonio Gracias, who was described by the plaintiff as a close friend of Musk and was the lead independent director from 2010-19, testified in 2021 that Musk could sell Tesla if he wanted to and the board could not stop him.

“Who worked for whom? Is Elon Musk working for the board or is the board working for Elon Musk,” said UConn Law School professor Minor Myers.

If the pay package is scrapped, the board could simply create a new one, Myers said, and do so with McCormick’s decision to lead them.

But circumstances have changed and made the process difficult.

“He owns Twitter now. How do they want to account for that?” said Myers, adding that it will be difficult to determine how to protect Musk from being distracted by other businesses.

“How much money do you have to put in front of this guy to get his attention?

Reporting by Tom Hals in Wilmington, Delaware; Additional reporting by Hyun Joo Jin in San Francisco Editing by Noeleen Walder and Nick Zieminski

Our standards: Thomson Reuters Trust Principles.

Tom Hals

Thomson Reuters

Award-winning reporter with more than two decades of experience in international news, focusing on high-stakes legal battles on everything from government policy to corporate deals.



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