Judge hears final arguments in Musk’s Tesla payment lawsuit

Judge hears final arguments in Musk’s Tesla payment lawsuit

Judge hears final arguments in Musk's Tesla payment lawsuit

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A lawsuit challenging the pay package that made Elon Musk the richest man in the world, at least for a time, moved closer to conclusion on Tuesday as attorneys for aggrieved Tesla shareholders and the board of directors automaker’s administration tried as a last resort to influence a judge. their favor.


The suit was filed in Delaware, where Tesla is incorporated, and focuses on whether the board gave shareholders enough information about Mr. Musk’s compensation before approving it. But the case also raises many other questions about Mr. Musk, including his management of Tesla, his acquisition of Twitter and whether the board can effectively monitor and police his behavior.

A group of shareholders have challenged a package of options that ended up giving Mr Musk the right to buy Tesla shares worth more than $70 billion before the stock started to lose weight value last year. For Mr. Musk to receive the award, which was one of the largest of its kind and later widely imitated by other companies, Tesla had to meet certain revenue, profit and share price targets that were considered as difficult to achieve at the time.

In their complaint, the shareholders claimed that Tesla provided “materially misleading” information to investors when asking them to approve the package. They asked the Delaware court to void the deal.

The lawsuit took on added importance after Mr Musk acquired Twitter last year. He faced widespread criticism for spending time trying to overhaul Twitter as Tesla shares tumbled and growth slowed amid growing competition. Mr Musk has sold billions of dollars worth of Tesla stock to raise money to help pay Twitter. One of the justifications for Mr. Musk’s salary at Tesla was that it was a way to keep him focused on building cars.

The case also raised questions about Tesla’s corporate governance and whether the board, which includes Mr Musk’s brother Kimbal Musk and several close friends of the chief executive, exercises a check on Mr. Musk. The lawsuit argued that Mr. Musk played a significant role in shaping his compensation and that the board, which is supposed to provide independent oversight, was filled with people who owed him their wealth.

Robyn Denholm, for example, was earning less than $1 million as an executive at an Australian telecommunications company before Mr Musk “chosen” her to become chairwoman of Tesla’s board of directors, Gregory Varallo said, shareholders’ attorney, to Chancellor Kathaleen McCormick, the judge in the case, on Tuesday.

A few years after joining the board, Ms. Denholm became “very wealthy and dynamically wealthy”, earning more than $250 million from Tesla stock options, Mr. Varallo said, citing a testimony.

Chancellor McCormick oversaw a five-day trial in November that included testimony from Mr Musk. Tuesday’s hearing, which lasted nearly three and a half hours, was one of the last opportunities for both sides to offer their interpretations of the testimony.

At the end of the hearing, the judge asked the lawyers for additional written arguments to clarify their positions, a sign that she was not likely to render a decision for several months. If it decides in favor of shareholders, it could demand that Mr. Musk return some or all of the money he has earned.

Tesla lawyers and directors argued the salary package was the product of a rigorous decision-making process. The money motivated Mr. Musk to make Tesla the most valuable auto company in the world, they said.

Daniel Slifkin, an attorney representing Mr Musk and Tesla directors, noted that Tesla investors also got rich as the company’s value soared to more than $1 trillion at its peak. (The company’s stock market value on Tuesday was about $620 million.)

Mr. Varallo maintained that the board had set performance goals for Mr. Musk that were not that difficult to achieve.

Although he received “the greatest compensation in the history of mankind”, Mr. Varallo said, Mr. Musk was a “part-time CEO” who was often distracted by SpaceX, his rocket company, and by Twitter.

“Where was the adult in the boardroom to come forward and tell Mr. Musk that Tesla was not his park?” said Mr. Varallo.

Mr. Slifkin said Mr. Musk’s time at Tesla was irrelevant.

“If he got the results, he was entitled to the quid pro quo,” Mr. Slifkin said.

When Tesla directors awarded Mr. Musk the salary package, no one believed the company would drive a nationwide transition to electric vehicles, said Evan Chesler, another attorney for the company.

“Detroit laughed at him,” Mr. Chesler said. “Nobody’s laughing anymore.”

Chancellor McCormick asked many questions during Tesla lawyers’ presentations, while allowing Mr. Varallo to present his case uninterrupted. It was a possible indication that she was more skeptical of the arguments of Mr Musk’s legal team.


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