Musk’s $56 billion Tesla pay package lawsuit goes to trial November 14
Elon Musk will face a November 14 trial to defend his record $56 billion Tesla Inc pay package. A Tesla shareholder in the suit claims it unjustly enriches him without requiring his full-time presence at the carmaker. He further alleges the board set easy performance targets and that Musk created the package to fund his dream of colonizing Mars.
Meanwhile, Tesla has contended that the package delivered an extraordinary 10-fold increase in value to shareholders. Kathaleen McCormick on Delaware’s Court of Chancery will be hearing the case. She had earlier overseen Twitter’s lawsuit against Musk that ended last month following which he agreed to close his $44-billion deal for Twitter. Musk used his Tesla stocks to pay for the deal.
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“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 going forward in terms of how Tesla is run and how Twitter is paid for,” Ann Lipton, a professor at Tulane Law School, told Reuters.
Tesla shareholder Richard Tornetta’s lawyers argue that the 2018 package did not make Musk focus on Tesla. Musk has been cited as a “part-time CEO” based on his testimony that in 2018 he worked Tuesday, Wednesday and Friday at the car company, and Monday and Thursday at SpaceX.
The lawsuit further mentions Tesla’s board chair Robyn Denholm’s email to Gabrielle Toledano, the Tesla Chief People Officer at that time, saying that the “minimal time” Musk was at Tesla was “becoming more and more problematic”.
Meanwhile, the company says that the package was about Musk hitting “audacious” targets, enriching Musk and shareholders, and not just about devoting fixed hours at the office.
The pay package allows Musk to buy one per cent of Tesla’s stock at a discount each time escalating performance and financial targets are met. Tesla has hit 11 of the 12 targets as its value ballooned to $650 billion from $50 billion. Amit Batish at Equilar, an executive pay research firm, says that Musk’s vested grants are worth around $50 billion, adding to his $200-billion fortune.
Musk’s stock grants make up six times the combined pay of the 200 highest-paid CEOs last year, according to Batish.
(With inputs from agencies)