Elon Musk, already busy pestering Twitter, is expected to take the stand Wednesday in a lawsuit attacking the more than $50 billion compensation plan awarded to him by Tesla’s board of directors.
He must testify before the Delaware court where the trial against the social network was to take place before he decides to honor his commitment and pay $44 billion to buy Twitter at the end of October.
The cause for which he is called this Wednesday follows the complaint by a shareholder of the electric car manufacturer, who is suing Tesla, his boss and certain members of his board of directors for having authorized in 2018 “the largest compensation plan ever granted to an executive”.
$56 billion in stock
The latter plans to pay Elon Musk $56 billion worth of Tesla stock based on the achievement of various ten-year targets.
Having fulfilled almost all of them, the leader has pocketed $52.4 billion in stock options in four and a half years.
Enough to fuel his fortune and help him rise to the rank of the richest man in the world.
According to plaintiff Richard Tornetta, Elon Musk did not need these financial incentives to achieve these goals.
But it dictated its terms to directors who, given their relationship with the iconic businessman or their personal interests, were not independent enough to object. And this when he did not even work full time for Tesla to the extent that he also heads the space company SpaceX and the start-ups Neuralink and The Boring Company.
Richard Tornetta requests the cancellation of the plan.
Lawyers representing the defendants argue that Elon Musk’s compensation plan is tied to the company’s performance, including on the stock market, and that it worked perfectly as Tesla’s value increased by more than tenfold since its adoption.
“Very unusual”
The trial, without a jury, began Monday with testimony from Ira Ehrenpreis, head of compensation on Tesla’s board of directors.
He called the targets set “extraordinarily ambitious and difficult” and stressed that the board wanted to motivate Elon Musk to focus on Tesla at a time when the company was still struggling to gain momentum.
The current president of this body, Robyn Denholm, spoke on Tuesday.
The judge in charge of the case is Kathaleen McCormick, who also dealt with the file that opposes Elon Musk to Twitter. She should make her decision in a few months.
It’s “very rare” for executive pay claims to go to trial, since judges often decide or throw them out and generally view them as strategic decisions, says Jill Fisch, a professor of business law at the University of Pennsylvania.
excessive impact
But in this case, the court ruled that the fact that Elon Musk owns about 22% of Tesla’s shares and is its CEO “could have an undue impact” on the board of directors and other shareholders, it indicates.
The trial, he said, is being watched by large companies because it could influence “the procedures to be followed to establish executive compensation.”
It also comes at a time when Elon Musk has been under severe pressure since his acquisition of Twitter in late October, between the departure of more than half of the employees, the flight of advertisers, warnings from various authorities and the confusing launch of new products.
During a speech on Monday, he jokingly admitted that his workload had “increased a lot lately.”
Source: BFM TV
