The trial on a compensation plan for the CEO of Tesla, Elon Musk, valued at more than 55,000 million dollars (about 53,300 million euros), began this Monday in a Delaware state court.
The lawsuit alleges that the performance-based stock options were negotiated by a compensation committee and approved in 2018 by members of Tesla’s board of directors who had conflicts of interest due to personal and professional ties to Musk.
The lawsuit, filed nearly four years ago, also alleges that the shareholder voted to approve this compensation based on an incomplete or misleading proxy statement.
The author argues that counsel erroneously characterized the compensation committee members as “independents” and characterized all of the objectives that motivated the purchase of the stock options as “stretch” goals that should be difficult to achieve, even though internal projections indicated that three would likely be achieved within 18 months of the shareholder vote.
“Any shareholder action based on a materially misleading proxy is void and the grant fails,” according to a brief from the plaintiffs’ lawyers.
Lawyers for the defendants disputed in their pretrial brief that two institutional advisers said the plan would require “significant and perhaps historic achievements” and demand growth that “appears to extend by any benchmark.”
The first witness to testify was Ira Ehrenpreis, a prominent venture capitalist and longtime friend of Musk’s who chaired Tesla’s compensation committee when the grant was formulated.
Under the plan, Musk could rake in billions of dollars if the maker of electric cars and solar panels met certain operating and market capitalization targets.
For every incidence of simultaneously achieving a market capitalization and an operating target, Musk, who already owned about 22% of Tesla when the plan was approved, would get shares equal to 1% of shares outstanding at the time of the grant.
Musk’s interest in the company would increase to around 28% if Tesla’s market capitalization grew by $600 billion (about €581 billion).
Each goal in the plan includes expanding Tesla’s market capitalization by $50 billion and achieving an aggressive target of revenue growth or pre-tax profit.
Musk would receive all the benefits of the payment plan, 55,800 million dollars (54,000 million euros), only if Tesla reached a market capitalization of 650,000 million dollars (about 629,000 million euros) and income and profits unprecedented in a decade. .
Source: TSF
