Elon Musk’s wage trial to decide if Tesla’s growth justifies a $56 billion salary


Elon Musk’s payroll process asks whether Tesla’s growth warrants a $56 billion compensation

After five days of testimony, including three hours from Elon Musk, a Delaware judge will now decide whether Musk’s $56 billion compensation package from Tesla Inc was justified by the company’s explosive growth or was undermined by a flawed process.

Musk and the Tesla executives named as defendants have repeatedly stated that the package accomplished what it set out to do: deliver a 10-fold growth in the company’s stock price, enriching investors and Musk.

“We thought that if we got this done, if this plan was executed, Tesla would be one of the most valuable technology companies,” Antonio Gracias, a Tesla board member from 2007 to 2021, told the Delaware Court of Chancery on Wednesday. . “It was a great deal for shareholders.”

The lawsuit seeks to resolve claims by shareholder Richard Tornetta that the 2018 pay package was dictated to subordinate executives by Musk, the richest person in the world, and approved by a vote of shareholders misled by Tesla.

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The trial concluded 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.

“I feel that even though it has come all the way to trial, a ruling will be in favor of Mr. Musk,” said Eric Talley, a Columbia Law School professor who has followed the case.

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

During the week-long trial, the directors said the compensation package was designed to help Musk guide the electric vehicle maker through a critical phase where he could have focused on his rocket company SpaceX or tunnel venture The Boring Co.

Musk told the board he wanted a huge package to fund his dream of traveling to Mars, or, as he testified, to “make life multi-planetary to ensure the long-term survival of consciousness” .

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Musk described his efforts to push the company from the brink of collapse in 2017 to exponential growth. “The amount of pain cannot be expressed in words,” Musk testified Wednesday.

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

The package allows Musk to buy 1% of Tesla’s stock at a deep discount whenever escalating performance and financial targets are met. Otherwise, Musk gets nothing.

Tesla has met 11 of the 12 targets as its value briefly rose to more than $1 trillion from $50 billion.

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

Much of the process focused on the information provided to shareholders before they approved the plan. Tornetta’s lawyers tried to show Tesla that three goals of the package were likely to be met quickly.

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The prosecution portrayed the directors as personal friends or business associates of Musk, who was the link to their wealth.

The directors tried to show they could stand their ground against Musk’s demands. But evidence of obtaining concessions was limited to the best method of accounting for the stock grants and a requirement that Musk hold his stock for five years.

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

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

“He’s like a labrador retriever. He sees a ball and he runs after it. You could almost say they didn’t pay him enough because he went after Twitter.”

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