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While Musk focuses on Twitter, his $56 billion Tesla salary goes to trial

While Musk focuses on Twitter, his $56 billion Tesla salary goes to trial

WILMINGTON, Del., Nov 7 (Reuters) – While Elon Musk is trapped in Twitter overhaulentrepreneur is going to trial to defend his record $56 billion Tesla Inc pay package against claims it is unfairly enriching him without needing a permanent presence at the automaker.

And Tesla (TSLA.O) is a shareholder seeks impeachment Musk’s 2018 pay contract, claiming the board set easy performance targets and Musk created a package to fund his dream colonizes Mars.

Tesla countered that the package brought an extraordinary tenfold increase in shareholder value.

The trial begins on November 14 and will be decided by Kathaleen McCormick in the Delaware court. She oversaw Twitter’s lawsuit against Musk, which ended last month when he agreed to shut down his A $44 billion business for Twitter, an acquisition he largely financed with his Tesla stock.

“If Musk loses this pay package in some massive way, I think we can expect to see a lot of things that are going to be really hard to predict, like what happens next in terms of how Tesla is run and how Twitter is paid.” because,” said Ann Lipton, a professor at Tulane Law School.

However, Lipton and other legal experts say lawsuit by Tesla shareholders Richard Tornetta will be much more difficult than Twitter’s case against Musk.

Musk founded and is the CEO SpaceXone of the world’s most valuable private companies, founded or co-founded Neuralink, which makes brain implants, tunneling venture The Boring Co, and OpenAI, an artificial intelligence research lab. He named himself last week Twitter CEO.

‘Part-time CEO’

Tornetta’s lawyers argue that the 2018 package failed to fulfill its stated purpose of focusing Musk on Tesla. They portray Musk as a “part-time CEO,” citing his testimony that in 2018 he worked Tuesday, Wednesday and Friday at the electric car maker and Monday and Thursday at the rocket company SpaceX, according to his deposition.

According to the lawsuit, Tesla board chairwoman Robyn Denholm said the “minimum amount of time” Musk had been at Tesla was “becoming increasingly problematic” in a 2018 email to Gabrielle Toledano, who was Tesla’s chief executive at the time.

The company argued that the package wasn’t about requiring Musk to punch a clock and be there for a certain amount of time each week, but to hit “bold” targets, enriching Musk and shareholders like Tornette.

The contentious pay package allows Musk to buy 1% of Tesla stock at a steep discount each time escalating performance and financial targets are met; otherwise Musk gets nothing. Tesla hit 11 of 12 targets as its value rose to $650 billion from $50 billion thanks to increased Model 3 production, according to court documents.

Musk’s grant awards are worth about $50 billion, according to Amit Batish of Equilar, a salary research firm. Donations add to his $200 billion fortune, the largest in the world.

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

The trial is likely to focus on Tornetta’s claims that the package was developed and approved by executives in charge of Musk and promoted to shareholders without disclosing that the first tranches were likely to be met based on internal projections.

BOARD CONTROL

Tornetta’s filings are full of examples of Musk-controlled boards.

For example, Antonio Gracias, who the plaintiff described as a close friend of Musk’s and who was the lead independent director from 2010 to 2019, testified in his 2021 deposition that Musk could sell Tesla if he wanted to, but the board could not to stop.

“Who worked for whom? Does Elon Musk work for the board or does the board work for Elon Musk,” said Minor Myers, a professor at UConn Law School.

Myers said if the pay package were to be scrapped, the board could simply create a new one with McCormick’s decision to guide them.

But circumstances have changed, complicating the process.

“He owns Twitter now. How do they want to account for that?” said Myers, who added that the challenge will be determining how to keep Musk from being distracted by other ventures.

“How much money do they have to put in front of this guy to get his attention,” he said.

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 over everything from government policy to corporate deal-making.



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