Billionaire Elon Musk may be clutching his pearls a little tighter as a Delaware judge left serious doubt whether his multi-billion Tesla pay package was done without Musk’s intervention.
In what was supposed to be the day of final arguments in a multi-year lawsuit at the Delaware Court of Chancery, Chancellor Kathaleen McCormick called for even more supplementary arguments at some future date over the $US56 ($AU82) billion pay package Musk received from Tesla back in 2018, incentivising him to keep on course as CEO. The final decision could still be months away, according to Chance the Lawyer, who reports on Delaware Chancery court decisions.
Relatively minor Tesla stockholder Richard Tornetta, himself a drummer in the heavy metal band Dawn of Correction, filed the suit back in 2019 complaining that Tesla’s board of directors weren’t so independent of Musk when it created Musks’ massive multi-billion pay package. He argued the pay went beyond “reasonable judgement” and that the board knew he wasn’t going to be on the ball 24/7 since he runs several other major companies like SpaceX, Neuralink, or The Boring Company. Lawyers for the Tesla board argued that the pay package was designed from the beginning to incentivise the billionaire to redouble his efforts on the EV maker.
Musk has a $US56 ($AU82) billion payment deal with Tesla, which was granted to him back in 2018. The agreement is based on hitting financial growth markers, which grants the CEO millions of dollars in Tesla stock options, namely 1% of outstanding shares when the company hits one of 12 grant periods. The company has hit 11 of those 12 grant milestones. Tesla’s most recent quarterly report showed the company has continued to see expanding revenue and car sales, even though it’s a long way away from Musk’s goal to sell 20 million electric vehicles annually by 2030.
During his final remarks, Tornetta’s attorney Greg Varallo argued the pay package should be cancelled because Musk and the Tesla board of directors misled shareholders about how those grants first came to be, and how close knit the directors really were to the company CEO. He told the court that a director couldn’t have really been independent if they had invested millions into Musk’s companies or vacationed around the world with him.
Musk’s attorneys reiterated their point that the payment package secured Musk’s full focus in transforming Tesla. They firmly denied the individual directors as a whole had been swayed by Musk to give him the lucrative pay package, even as McCormick mentioned that Musk helped pushed through the negotiations, at least to some degree.
During a trial held in November last year, Musk argued that even though he has spent many hours at work on his other companies, most recently through his $US44 ($AU64) billion acquisition of Twitter, he would be done spending so much time on the blue bird app once the platform was “fixed,” or more specifically, once the “fundamental organizational restructuring” was completed. He has since mentioned he plans to step away from Twitter by the end of 2023. He also told the court that he had been spending a little more than 50% at Tesla during the time after he received that pay package, but had since been splitting his time between his other major companies.
His time at Twitter also came into starker light during the plaintiff’s Tuesday arguments. Varallo again reportedly brought up how Musk took engineers away from Tesla just so they could beef up some of Twitter’s systems during those early weeks when Musk first bought the platform.
According to emails listed in the court documents, Musk told Todd Maron, Tesla’s former general Counsel, that the additional salary was all part of his long-touted efforts to get man to Mars, which only would be possible “if I am successful in leading Tesla to be one of the world’s most valuable companies.”
Musk has faced other lawsuits related to his businesses. A jury ruled in favour of the Tesla owner last month when they determined his infamous “funding secured” tweet about taking Tesla private wasn’t equivalent to fraud.
Musk is still focusing a lot of his time on Twitter, though that company is also facing numerous lawsuits from laid off employees and from the landlords of some of its worldwide properties. This past January, a marketing firm sued Twitter arguing the company had stopped paying it for promotional items including a nearly $US7,000 ($AU10,287) “swag gift box” that was handed over to Musk when he first came to Twitter HQ last October, according to court docs filed in California court. That invoice listed among the documents said the gift box included a $US689 ($1,012) bottle of whiskey from Japan and a $US215 ($AU315) cheese board.