Tesla Mask pay package under scrutiny in Delaware court

WILMINGTON, Delaware (AP) Tesla shareholder lawyers on Tuesday called on a Delaware judge to invalidate a 2018 compensation package awarded by the company’s board of directors to CEO Elon Musk that could potentially be worth more than $55 billion.

The shareholder’s lawyers argue that the compensation package should be canceled because it was dictated by Musk and is the product of fictitious negotiations with directors who are not independent of him. They also say it was approved by the shareholders, who provided misleading and incomplete information in the official statement.

Delaware courts often rely on the “business judgment” of corporate directors to make decisions in the absence of evidence of wrongdoing. But lawyer Greg Varallo argued that Tesla’s defendants should be required to show that the compensation plan was “totally fair” to shareholders because Musk was the controlling shareholder.

Defense lawyers countered that the pay plan was fairly agreed upon by a compensation committee whose members were independent, contained performance milestones so high that some Wall Street investors ridiculed them, and blessed a shareholder vote that was not even required by Delaware law. They also allege that Musk was not a controlling shareholder as he owned less than one-third of the company at the time.

Tuesday’s arguments followed a November lawsuit in which Musk denied that he dictated the terms of the compensation package or attended any meetings where the plan was discussed by the board, its compensation committee, or the working group that helped develop it.

Musk also downplayed the notion that his friendships with some Tesla board members, including occasional vacations together, meant they were likely to do his bidding.

The plan called for Musk to receive billions if Tesla reached certain market capitalization and operating targets. For each time the market cap and operating milestones are reached simultaneously, Musk, who owned about 22% of Tesla at the time the plan was approved, will receive shares equal to 1% of the issued shares at the time of the grant. His stake in the company would rise to around 28% if the company’s market capitalization grew by $600 billion.

Tesla has achieved all twelve market cap milestones and eleven operating milestones, giving Musk nearly $28 billion in stock option gains, according to a report filed by plaintiff’s attorneys after the trial. However, share option grants are subject to a five-year holding period.

Varallo told Chancellor Kathleen St. Jude McCormick that Musk should be forced to return some, if not all, of the option grants he had earned.

Defense attorney Evan Chesler said the compensation package was a “high-risk, high-reward” deal that not only benefited Musk, but also Tesla shareholders, who saw the value of the Austin, Texas-based company rise from $53 billion. dollars to more than. $600 billion, while it briefly hit $1 trillion last year.

Chesler also said that Tesla made sure the $55 billion compensation figure was included in the proxy statement because the company wanted shareholders to know “that was a heartbreaking figure that Mr. Musk could have earned.”

“No one is laughing right now,” Chesler added, noting that while some Wall Street investors are betting against Tesla, the company’s leadership in electric vehicles has changed the US auto industry.

Following Tuesday’s hearing, McCormick ordered another round of briefings on various legal issues.

Content Source

Dallas Press News – Latest News:
Dallas Local News || Fort Worth Local News | Texas State News || Crime and Safety News || National news || Business News || Health News

texasstandard.news contributed to this report.

Related Articles

Back to top button