Elon Musk’s trial begins to decide the fate of his $56 billion Tesla salary

Elon Musk’s trial begins to decide the fate of his  billion Tesla salary

Elon Musk’s trial begins to decide the fate of his $56 billion Tesla salary

WILMINGTON, Del., Nov 14 (Reuters) – A trial began on Monday over allegations by shareholders that the $56 billion pay package of Tesla Inc’s chief executive. Elon Musk was saddled with easy performance targets and that investors were duped into endorsing him, and Musk is set to take a stand later this week.

And Tesla (TSLA.O) The shareholder hopes to prove during the five-day trial that Musk used his dominance over the electric vehicle maker’s board to dictate the terms of the 2018 package, which did not even require him to work at Tesla full-time.

Musk, the world’s richest person, will testify on Wednesday, Greg Varallo, a lawyer for shareholder Richard Tornette, said Monday in a court in Wilmington, Delaware.

The trial began with Ira Ehrenpreis, a Tesla board member since 2007, taking the stand to describe the company’s early years and Musk’s role.

“I was very impressed with his vision for this venture,” Ehrenpreis said.

Tornetta asked the court to scrap the pay package, which is six times the top 200 CEO salaries combined in 2021, according to Amit Batish of research firm Equilar.

Musk and Tesla executives, who are also indicted, have denied the allegations. They argued that the pay package did what it was intended to do – ensure that the entrepreneur successfully guided Tesla through a critical period, which helped the stock rise tenfold.

The case will be decided by Chancellor Kathaleen McCormick of the Court of Chancery in Delaware. She oversaw the legal dispute between Twitter Inc (TWTR.MX) and Musk who ended up buying the social media platform for $44 billion last month.

A Tesla shareholder lawsuit claims the pay package should have required Musk to work full-time at Tesla. Companies shareholders became concerned that Musk is distracted by Twitter, which he warned against he might not survive economic decline.

Musk said at a business conference on the sidelines of the G20 summit in Bali, Indonesia on Monday that he is too much on his plate right now.

Legal experts say Musk is in better legal position in the case of payment than he was in the Twitter lawsuit, which prevented him from abandoning the download.

According to legal experts, boards have wide latitude to set executive compensation.

However, directors must meet stricter legal tests if the pay package includes a controlling shareholder, and part of this trial is likely to focus on whether that description fits Musk. Although he only owned 21.9% of Tesla in 2018, prosecutors are likely to cite what is seen as his domineering personality and connections to executives.

A total of 19 witnesses are scheduled to testify, including 2018 directors and executives, compensation experts and consultants who helped craft the pay package.

The disputed package allows Musk to buy 1% of Tesla shares at a steep discount each time escalating performance and financial targets are met. Otherwise, Musk will get nothing.

Tesla hit 11 of 12 targets as its value rose briefly to more than a trillion dollars from $50 billion, according to court documents.

The decision is likely to take about three months after the trial and could be appealed to the Delaware Supreme Court.

Reporting by Tom Hals in Wilmington, Delaware; Edited by David Gregorio and Jonathan Oatis

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 over everything from government policy to corporate deal-making.

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