The process of five days comes as Elon Musk is struggling to oversee a chaotic overhaul of Twitter, which he was forced to buy out in a separate legal battle.
Musk told court Wednesday that he made certain Tesla Inc decisions without the approval of the company’s board as he defended his $56 billion salary package against claims by having dictated the terms to a compliant board of directors.
Tesla shareholder Richard Tornetta sued Musk and the board in 2018 and hopes to prove that Musk used his dominance on the Tesla board to get an outsized compensation package that didn’t require him to work full-time at the electric car manufacturer.
When questioned by Tornetta’s attorney, Greg Varallo, Musk dismissed claims that his pay package goals were easy to achieve. But given the result from the brink of bankruptcy in 2017 to explosive growth, the doubts seem to have been dispelled.
Varallo has repeatedly tried to portray Tesla as a company under the control of Musk, the richest person in the world, and has tried to prove that Musk has bypassed the Tesla board of directors on several occasions.
For example, Musk said he made a unilateral call to end Tesla’s acceptance of the cryptocurrency Bitcoin and acknowledged that the board had not been notified before telling analysts in October that Tesla’s board was considering the ability to buy back up to $10 billion in stock.
But the testimony did not conclusively prove who developed Musk’s 2018 salary package or establish whether it was a product of his demands rather than negotiations with the board.
The five-day trial comes as Musk is struggling to oversee a chaotic overhaul of Twitter, which he was forced to buy for $44 billion in a separate legal battle before the same judgeChancellor Kathaleen McCormick, after trying to back out of that agreement.
Musk tweeted this week that he would be staying at Twitter’s San Francisco headquarters around the clock until they sorted out the company’s problems, and said Wednesday he’d flown into Delaware on an overnight flight from the social media company .
Musk said his focus on restructuring Twitter would soon subside and he would find someone else to lead it. He was dismissive of the argument that his salary contract should have oblige him to spend a specified number of hours at Tesla.
“I work practically all the time”, he said. “I don’t know what it would change to clock in.”
Although Musk has a history of combative testimony, calling lawyers “reprehensible” or “bad human beings”was relatively mild-mannered in Wednesday’s proceedings, although he did at times express frustration with Tornetta’s attorney.
At one point, Musk told plaintiff’s attorney, “Your question is a complex question that is commonly used to mislead people.”
Musk acknowledged he’s not a lawyer, but added: “when you get involved in enough lawsuits, you learn a few things.”
Elon Musk the “Product Genius”
Tornetta asked the court to void the 2018 package, which his lawyer said was $20 billion higher than the annual gross domestic product of the state of Delaware.
Musk’s legal team and Tesla directors defined the compensation package as a series of bold targets that worked to drive Tesla’s stock value 10-fold, to over $600 billion from approximately $50 billion.
They argued that the plan was developed by independent board members, advised by outside professionals and with input from large shareholders.
Tornetta’s attorney tried to prove that Musk was involved all along. A May 2017 email appeared to establish that Musk was pushing for the compensation plan months before the board negotiated it with him.
“I’m planning something really crazy, but also high stakes,” he wrote.
Antonio Gracias, a venture capital investor and longtime friend of Muskwho also served on the Tesla board of directors from 2007 to 2021, took the stand after Musk testified.
Gracias said he is ready to push Musk back if necessary. “I don’t take any punches from any of my CEOs”he told the court.
The controversial Tesla package allows Musk to buy 1 percent of Tesla’s shares at a steep discount whenever increasing performance and financial goals are met. Otherwise, Musk gets nothing.
Tesla met 11 of 12 goals, according to court documents.
Shareholders generally cannot challenge executive pay because the courts typically defer to the judgment of the directors. The Musk case survived a motion to dismiss because it was determined that it could be considered a controlling shareholderwhich means stricter rules apply.
Gracias described Musk as essential to the company’s success in his testimony, defining it “extraordinary” it’s a “product genius”.
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