Elon Musk Is In Court For His Lavish Tesla Compensation

On Monday morning, the multi-day trial over billionaire Elon Musk’s Tesla remuneration package case began at Delaware’s Court of Chancery. The first day of the trial is taking place while the Tesla CEO is actively overhauling Twitter following his $44 billion acquisition of the social media business in late October. The compensation lawsuit will be heard by Chancellor Kathaleen McCormick, the same jurist who presided over the contentious court battle between Musk and Twitter.

Richard Tornetta, a Tesla shareholder, first launched the lawsuit several years ago with the intention of having the 10-year compensation deal for Musk that year declared unconstitutional and revoked. Tesla is only cited as a notional defendant in the action, with Musk and six other people named as defendants.
According to a proxy statement, as part of his remuneration package, the business granted him stock options with a 10-year grant that will vest over 12 installments if the company reaches certain operational and market capitalization benchmarks. The CEO receives options worth roughly 1% of Tesla’s equity for each tranche.

When contacted for comment, Greg Varallo, a lawyer for Tornetta, referred FOX Business to the group’s pretrial brief. Regarding the lawsuit, FOX Business also contacted Musk’s attorney, but as of the time of publication, no comment had been received.

Tornetta’s attorneys said Musk “conceived of and dictated [the] key features” of his remuneration package, which they called the “biggest compensation grant in human history” and unreasonable, in the plaintiff’s pretrial brief, which CNBC posted online. They said Musk worked “part-time” as an executive.
They said that given Musk’s shareholding in the electric vehicle maker and his current position at Tesla, the remuneration package was “unnecessary to incentivise” him. According to the lawyers, there were no clauses “restricting or limiting Musk’s allocation of time or attention to non-Tesla endeavors” or “requiring him to dedicate time or attention” to Tesla.

The Boring Company, Open AI, SpaceX, and Neuralink were mentioned in the plaintiff’s pre-trial brief. Musk co-founded the other three companies and is the CEO of SpaceX. However, in the pretrial brief submitted on behalf of Musk and the other defendants, their lawyers disputed the idea that it was not essential, arguing that at the time of the pay package, “the extent of Musk’s engagement in Tesla and the degree to which he would focus on Tesla was undetermined.” According to Musk’s attorneys, the board “fairly judged an audacious strategy” was required and stockholders have benefited from it, according to the brief that PlainSite posted online.

According to the defendants’ brief, the lawyers argued it did not “make sense to compel” the CEO to devote a specified amount of time to Tesla because the expansion required for him to be compensated “could not be completed without significant time and attention.” They said that because Musk “is not the normal CEO,” the proposal was “not a standard pay package meant to recompense the regular executive for overseeing the day-to-day operations of a mature corporation.”

According to the brief, Tornetta’s team also asserted that several board members approved the package despite purportedly missing “standard benchmarking” because they had personal or professional conflicts of interest with Musk. Musk’s attorneys contended that board members did not lack independence in the defendants’ pretrial filing and that Musk was only involved “as the counterparty,” not a controlling shareholder.

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The plaintiff’s counsel claimed that some performance goals in the incentive plan, which may be worth up to $50 billion, were already incorporated in Tesla’s financial estimate and “deemed probable of achievement.” Tornetta’s team further claimed that it was “secured with a substantially deceptive and omissive proxy statement” through a subsequent shareholder vote.
On the other side, Musk’s legal team asserted that it accurately disclosed the package’s composition and objectives. They said that at the time of the pay package, Tesla’s “success was far from assured” and that its internal projections had “stretch aims” that were “extremely difficult yet attainable.”

According to reports, during the trial on the Tesla compensation package, Musk and other witnesses will testify.

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