Musk’s pay lawsuit asks if Tesla’s growth warrants $56 billion in pay

Musk and the directors of Tesla named as defendants have repeatedly testified that the plan achieved its goal of increasing the company’s share price 10-fold, thereby enriching both investors and Musk.

“We believed that if we could pull it off, if this plan was executed, Tesla would be one of the most valuable technology companies,” Antonio Gracias, a member of Tesla’s board of directors from 2007 to 2021, told the Court of Chancery of Delaware Wednesday. “It was an excellent deal for the shareholders”.

The lawsuit seeks to resolve shareholder Richard Tornetta’s allegations that the 2018 compensation package was dictated by Musk, the world’s richest person, directors submitted and approved by a vote of shareholders who were misled by Tesla.

The trial ended on Friday as Musk struggles to oversee a chaotic overhaul of Twitter Inc, which he was forced to buy for $44 billion in a separate legal battle before the same judge, Chancellor Kathaleen. McCormick.

“My feeling is that even though the case has gone to trial, a decision will favor Mr. Musk,” said Eric Talley, a Columbia Law School professor who has been following the case.

It will be months before Ms McCormick makes a decision and her decision can be appealed to the Delaware Supreme Court.

During the week-long trial, administrators said the salary package was intended to ensure that Musk guides the electric vehicle maker through a critical phase, when it could have focused on its rocket company SpaceX or about his tunnel boring company The Boring Co.

Musk told the board that he wanted a huge package to fund his dream trip to Mars, or as he testified, to make “life multi-plantar to ensure the long-term survival of the planet.” awareness.”

Musk described his efforts to push the company from the brink of failure in 2017 to exponential growth. “The amount of pain, no words can express it,” Musk testified on Wednesday.

Gracias recalled that Musk celebrated his birthday in a factory conference room with a grocery store cake. “It was everyone on deck, 24/7, brutal,” he told the court.

The deal allows Musk to buy 1% of Tesla shares at a steep discount whenever incremental financial and performance targets are met. Otherwise, Musk gets nothing.

Tesla achieved 11 of 12 goals and its value briefly jumped from $50 billion to over $1 trillion.

Tornetta wants the plan canceled and the shares awarded under the plan returned to Tesla.

Much of the trial focused on the information provided to shareholders before they approved the plan. Tornetta’s lawyers tried to show that Tesla was concealing that three objectives of the plan were likely to be achieved quickly.

The plaintiff portrayed the directors as personal friends or business partners of Musk, who was the nexus to their wealth.

The administrators tried to show that they could hold the line in the face of Musk’s demands. But the evidence of winning concessions was limited to the best method of accounting for stock awards and the requirement for Musk to hold onto his stock for five years.

“It wasn’t a knock-down, drag-out affair,” Todd Maron testified about salary negotiations in 2017, when he was general counsel.

Talley said Musk is a unique CEO and his compensation reflects that.

“He’s like a Labrador retriever. He sees a ball and he runs after it. You could almost make an argument that they didn’t pay him enough because he ran after Twitter.”

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