Elon Musk takes sides over his Tesla paycheck


Washington DC
Cnn

Tesla CEO Elon Musk testified this morning in a shareholder lawsuit examining the massive compensation package that helped make him the richest person in the world.

Tesla is being sued by plaintiff Richard J. Tornetta, who says the company was wrong to award Musk its 2018 compensation package, which shareholders approved at the time. Tesla said it may have been worth nearly $56 billion at the time, and the net worth today is $50.9 billion.

Musk took his stand at the Delaware Court of Chancery in Wilmington shortly after 9 a.m. ” or leave the company.

Musk began the day under cross-examination by his defense attorney and an attorney for the plaintiff, where he was asked about Tesla’s governance and his time at the company, as well as his relationship with the board, which is supposed to be independent of Musk and represent the shareholders. Musk acknowledged his friendship with board members, including some shared family vacations. Under questioning, Musk defended himself, saying he confirmed his duty to raise Tesla’s market value, but admitted he sometimes doesn’t seek board approval for public statements.

The lawsuit alleges that Musk’s huge salary package was unfair enrichment and argues that the board failed to fulfill its legal duty to act in the best interests of Tesla shareholders. The lawsuit describes Musk as a “part-time CEO,” while he leads other initiatives. One of the points of contention in the case is whether or not Tesla’s board is truly independent of Musk and represents shareholders, or whether it had undue influence on the board to award him such a large salary.

Musk himself controls over 20% of all outstanding Tesla stock, including unexercised options.

Musk initially denied on Thursday that he essentially negotiated against himself regarding how many shares he would receive in the pay package. (Negotiating against yourself would essentially give Musk total control over the outcome and raise big questions about the board and whether it fulfilled his fiduciary responsibilities.)

But plaintiff’s attorney Gregory Varallo then reproduced some of Musk’s depositions in which he said at one point regarding the salary package, “I guess I was negotiating against myself.”

Musk later admitted that he said it. It was one of several occasions when Varallo appeared to point out inconsistencies in Musk’s statements, current and previous.

Less than three minutes into the questioning, Musk said he believed there had been a consultation with the board of directors before his title changed to “Technoking.”

Varallo then reproduced Musk’s deposition in which Musk said he did not consult with the board about the title change.

Musk had also said in his deposition, which was rehearsed in court Wednesday, that he was the person who had Tesla’s vision.

But in court on Wednesday Musk struck a different tone and objected to the question being asked in a yes-no format.

“I think you are asking complex questions where yes or no is not possible. Yes is more accurate than no,” Musk said on Wednesday. “But your question is a complex question that is commonly used to mislead people.”

Varallo highlighted the degree of control Musk holds over Tesla.

Musk said he did not seek approval when he recently announced a potential share buyback. He also said he didn’t seek approval saying he saw a path for Tesla that was worth more than Apple and Saudi Aramco, the two most valuable companies in the world.

Plaintiff’s attorneys described this week’s package as being close to the gross domestic product of the entire state of Delaware and far more expensive than building the World Trade Center. They also compared Musk’s compensation to Tesla’s average salary, which they estimate is $40,000.

While the trial centers on Musk’s compensation, the plaintiffs’ attorneys have asked a wide variety of questions regarding his governance of Tesla. Musk protested a question about when he tweets about Tesla.

“We are under cross-examination in an interesting case, Mr. Musk,” Varallo replied. “So when your lawyer wants to make an objection, he has the right to do so, but sadly you don’t. I suspect he will if he doesn’t like the question.’

The trade led Musk to repeat his criticisms of the SEC.

“The consent decree was issued under duress,” Musk said on Wednesdayreferring to a 2018 settlement with the SEC over Musk’s claims that he had “secured funding” to bring private Tesla to $420 a share. “An agreement entered into under duress is invalid as a basis of law.”

In a TED talk earlier this year, Musk said he only agreed to a deal because if he continued to fight the SEC, Tesla’s banks would stop funding at a time when it needed cash. “I was forced [to lie] to save Tesla’s life and that’s the only reason,” Musk said at the April event.

Then Varallo he asked if Musk had any legal training. Musk described some familiarity.

“If you’re involved in enough lawsuits, you pick up a few things along the way,” Musk said.

Tesla executives have defended Musk’s pay package in two days of testimony so far.

“It was about motivating him to do bold, daring things and he put his time and energy into that at odds with his other interests,” Tesla chairman Robyn Denholm testified Tuesday. Musk was interested in funding interplanetary travel, he said. In addition to Tesla, Musk is also the CEO of SpaceX and owner of Twitter, as well as leads the Boring Company, which specializes in underground tunnels, and is the founder of Neuralink, which seeks to insert computer chips into people’s brains.

Musk’s salary package goals have been characterized as high and incredibly difficult to achieve.

Former Tesla Chief Financial Officer Deepak Ahuja described the plan as “very high risk, high reward.”

“While I believe deeply in Tesla, I felt the difficulty level of these milestones was so high that for a mere mortal like me, I didn’t find it a personally compelling incentive plan,” Ahuja said.

Musk pressed shareholders to approve the plan, warning he was “very offended” by the lack of support and that those who objected would not be welcome at any of his companies, according to courtroom emails read by the company’s lawyers. ‘actor.

Chris Isidore contributed to this story.

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