WILMINGTON, Dell, Nov 7 (Reuters) – As Elon Musk sinks into his overhaul of Twitter, the entrepreneur is heading to court to defend his record $56 billion salary package from Tesla against allegations that unfairly enrich him without having to full time. Being in the automaker.
A Tesla shareholder (TSLA.O) is seeking to cancel Musk’s 2018 payment deal, claiming that the board of directors set easy performance targets and that Musk created the package to fund his dream of colonizing Mars.
Tesla responded by saying the package provided an extraordinary 10-fold increase in value for shareholders.
The trial begins on November 14 and will be decided by Kathleen McCormick in Delaware court. She oversaw Twitter’s lawsuit against Musk that ended last month when he agreed to close his $44 billion deal to Twitter, an acquisition he funded largely from his Tesla stock.
“If Musk loses this pay package in a massive way, I think we can expect to see a lot of things that are going to be really hard to predict, like what will happen in the future in terms of how Tesla is run and how it gets paid on Twitter,” said Ann Lipton, a professor at Tulane College. to the law.
However, Lipton and other legal experts said the lawsuit brought by Tesla shareholder Richard Torneta would be much tougher than Twitter’s case against Musk.
Musk founded and is CEO of SpaceX, one of the world’s most valuable private companies, and also founded or co-founded Neuralink, which makes brain implants, tunneling project The Boring Co, and OpenAI, an artificial intelligence research laboratory. Last week, he appointed himself CEO of Twitter.
Tornetta’s lawyers argue that the 2018 package failed in its stated goal of focusing Musk on Tesla. They portray Musk as a “part-time CEO,” citing his testimony that in 2018 he worked Tuesdays, Wednesdays and Fridays at the electric car maker, and Monday and Thursday at the rocket company SpaceX, according to his testimony.
According to the lawsuit, Tesla Chairman Robyn Denholm said the “minimal amount of time” Musk spent at Tesla “became more and more problematic” in a 2018 email to Gabrielle Toledano, who was at the time Tesla’s chief of staff.
The company argued that the package was not about requiring Musk to hit the clock and be on site for set hours each week, but to achieve “bold” goals, enriching Musk but also shareholders like Tornetta.
The disputed pay package allows Musk to buy 1% of Tesla stock at a significant discount each time the upswing performance and financial goals are met; Otherwise, musk gets nothing. Tesla hit 11 of its 12 goals as its valuation ballooned to $650 billion from $50 billion on the back of increased Model 3 production, according to court papers.
Musk’s acquired grants are worth about $50 billion, according to Amit Patich of Equilar, a pay research executive. Grants contribute to his $200 billion fortune, the largest in the world.
Musk’s stock grant package is larger than the total salaries of the 200 highest-paid CEOs last year — six times as much, according to Bteish.
The trial is likely to focus on Torneta’s claims, as the package was developed and approved by managers beholden to Musk and promoted to shareholders without revealing the first tranches it was likely to meet based on internal expectations.
Tornetta’s filing is full of examples of a Musk-controlled board.
For example, Antonio Gracias, whom the plaintiff described as a close friend of Musk and was a key independent director from 2010-19, testified in his 2021 testimony that Musk could sell Tesla if he wanted and the board couldn’t stop him.
“Who has worked for whom?” said Minor Myers, a professor at UConn Law School.
Myers said that if the pay package is scrapped, the board can simply create a new package and do so with McCormick ruling them out.
But circumstances changed and complicated the process.
“Now he owns Twitter. How do they want to take that into account?” Myers, who added that it will be difficult to determine how to prevent Musk from being distracted by other projects.
“How much money do they need to put in front of this guy to get his attention,” he said.
Additional reporting by Tom Hales in Wilmington, Delaware. Additional reporting by Hyun Joo Jin in San Francisco Editing by Nolen Walder and Nick Szyminski
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