Business Tesla salary of Elon Musk's $56 billion is being...

Tesla salary of Elon Musk’s $56 billion is being reviewed in Delaware court


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Lots of cases — and the lawsuits that come with them — are streaming through Delaware, and it appears that Tesla CEO and “Chief Twit” on Twitter Elon Musk spent some time there on Wednesday.

Justin Sullivan and Getty Images

Elon Musk at a Tesla event in 2015.

The richest man in the world bought Twitter in late October after being sued by the company in Delaware’s Chancery Court to push him through the deal. Now the same court — and the same judge as the Twitter case, Kathaleen St. J. McCormick — is hearing another case related to Musk.

Musk testified Wednesday regarding issues raised about his executive compensation, specifically whether he was committed enough to Tesla to receive such a large sum.

“I was totally focused” on running Tesla, he said, according to the Associated Press.

The lawsuit that started the lawsuit was brought by Tesla shareholder Richard Tornetta, who receivables that Musk’s 2018 board-approved compensation package was excessive and in violation of the board’s obligations to shareholders. Further, the lawsuit alleges that Musk has too much on his plate to pull off a compensation package that could be worth more than $50 billion, per TechCrunch.

The legal documents call it “the largest compensation grant in human history,” the outlet noted.

Tesla and Twitter are both incorporated in Delaware, as are most very large companies, due to the state’s tax incentives. This is why both cases are going to the state chancery court. It has “unique competence,” at the core of corporate law.

The trial will last about a week and Judge McCormick is likely to rule within months. according to the New York Times.

What is the Tesla lawsuit about?

Musk’s compensation (stock options, salaries and bonuses) as CEO of Tesla (going back to 2009) was tied to performance, as noted in the 2019 pre-trial advisory of Joseph R. Slights III, former Vice Chancellor of the Court of Chancery. (Mc Cormick taken over the briefcase of Slights.)

After Tesla met the goals outlined in previous compensation packages, the board created a new one for Musk and voted to approve it in January 2018.

The new package established a series of 12 performance targets and corresponding groups of stocks, related to Tesla’s ability to grow its market cap, as well as sales and earnings. Upon reaching those goals “corresponding to each tranche of the Award, options of Musk representing 1% of Tesla’s current total shares outstanding will vest,” Slights wrote.

This means that Musk would earn the equivalent of 1% of the company’s total outstanding shares. If he achieves all those goals, Slights added, the maximum value of the total equity award will be $55.8 billion. The company has achieved 11 out of 12 so far, according to TechCrunch.

Tornetta sued in 2019 saying the package was too big and didn’t motivate Musk to focus on Tesla versus his other ventures. Musk is, of course, a busy man. He is the publicly traded CEO of Tesla and SpaceX and now Twitter, at least in the meantime.

Related: Elon Musk’s Twitter Mass layoffs have begun: ‘Has the red wedding begun?

Musk’s legal team has said that a unique, powerful CEO deserves an impressive compensation package.

“The plan designed and approved by the board of directors was not a typical pay package designed to compensate the regular executive for overseeing the day-to-day operations of a mature company,” Musk attorney Evan Chesler wrote in a document. , according to Bloomberg’s law. “That’s because Musk isn’t your typical CEO.”

On that subject, in court, the plantiffs’ attorney Greg Varallo asked Musk about his title at Tesla, “Technoking.”

“I think comedy is legal,” Musk replied to the lawyer. Varallo also asked questions about how he manages to run his various businesses, from Twitter to SpaceX.

The multi-billionaire CEO told Varallo that it wasn’t really the plan to be the leaders of any of these companies and that he would like to be more of an engineer, the AP reported.

Musk said he debated leaving Tesla at one point. Board member Antonio Gracias said later Wednesday that it was too difficult to find a replacement, according to the Times.

“We needed him all the time, all the time,” Gracias said.

The lawsuit alleged that because Musk is friends with board members including Ira Ehrenpreis and James Murdoch, he generally exerts too much influence over them — despite withdrawing himself and his brother Kimbal from the compensation discussion — and that the decision is not fair. according to to TechCrunch.

Testifying on Wednesday, Musk claimed that the vacations he spent with some board members weren’t super intimate.

“For me it was an email with an opinion,” he told the court. Gracias confirmed in his testimony that he has been on vacation with Musk.

The question of whether or not there was a conflict of interest is one of the reasons why the Slights initially denied Musk’s try to dismiss the lawsuit. Typically, the court would leave executive compensation to a company, and “this court’s sincere deference to board decisions regarding executive compensation does not match our reflexive presumption when a board is doing business with a controlling shareholder,” Slights wrote. in the 2019 advisory.

Whether or not Musk was operating as a controlling stakeholder (Musk owns the largest stake in Tesla, but not the majority, and leaves it up for debate) will likely come up again when McCormick hears the case, an expert told Bloomberg Law.

Overall, “this has the potential to become a very important case from an executive compensation standpoint,” Jill Fisch, a professor of business law at the University of Pennsylvania, told the outlet.

“It won’t get the attention the Musk-Twitter case got from the general public, but it’s still important,” she said.

Shreya Christina
Shreya has been with for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider team, Shreya seeks to understand an audience before creating memorable, persuasive copy.


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