Tesla Goes to Court Over Massive Elon Musk Pay Package

Tesla Goes to Court Over Massive Elon Musk Pay Package

News by Anja PaspaljAnja Paspalj
Published: November 15, 2022

Elon Musk returns to court.

Following Twitter's many debacles, the multifaceted CEO will be testifying in court this Wednesday in what may be a case of great importance for Tesla -- Musk's pay package. The company is set to defend what has been described as “the largest compensation grant in human history.”

An Unjustified Compensation Package By Tesla?

Many questions are being brought up in this case initially filed in 2019 by Richard Tornetta, a Tesla shareholder, who claims that the compensation grant was unjustly determined.

While CEO compensation grants are known to be lavish, this specific one is estimated at $56 billion, reinforcing Musk’s dominance as the wealthiest man on Earth, according to the Bloomberg Billionaires Index.

In the name of Tesla shareholders, Tornetta claims that Musk exploited his position at Tesla to acquire the massive compensation grant with personal ambitions to invest in his long-term plan of colonizing Mars.

Another claim noted that the board of directors behind the compensation plan lacked independence from Musk, and as such, could have been personally inclined to push the proposition forward.

Notedly, the board at the time included Musk’s brother, Kimbal, as well as personal friends who invested in other projects that Musk headed.

Despite words of caution and advice against the proposed compensation plan by the Institutional Shareholder Services, the plan was approved in 2018.

Tesla and Elon Musk: A Success Story?

Another question that will be posed during the trial, which started on November 14, is if one of the main statements for the approval of the compensation package was not achieved – that is, that Musk must focus primarily on Tesla.

“Indeed, Musk testified that since the Grant’s approval, he has spent a little more than half his time on Tesla matters and has dedicated substantial time and attention to various other endeavors,” the lawsuit states.

This rings true as Musk holds many CEO positions in a range of companies including the aerospace company SpaceX, brain interface startup Neuralink, tunneling venture The Boring Co., and now the acquisition of Twitter.

Musk’s lawyers fired back on this point by putting Tesla’s results since Elon Musk joined the company in the spotlight.

“Under the proposed plan, Musk would not earn any compensation at Tesla unless he drove tremendous growth, which could not be accomplished without significant time and attention from the CEO,” said Musk’s lawyers.

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There is no denying the results that have been achieved. In that time, Tesla has hit 11 out of its 12 company targets and its value has increased from $50 billion to $1 trillion.

Although Musk was not involved with Tesla as a classic 9-5, his method of leadership led to results.

But still, the question remains: does it justify a compensation grant of an estimated $56 billion?

Whatever the results of the trial may be by the time it ends in three months, this could be a case of great importance and reputation management for Tesla.

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