Washington, DC
CNN
–
CEO of Tesla Elon Musk This morning witnessed a Shareholder lawsuit Examine 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 his compensation package in 2018, which shareholders agreed to at the time. Tesla said at the time it could be worth approximately $56 billion, and today’s net worth is $50.9 billion.
Musk took the stand at the Delaware Chancery Courthouse in Wilmington shortly after 9 a.m. Musk’s testimony came as he was asserting control of Twitter, and gave the staff overnight. Warning becoming “too hardcore,” including “working long hours at a high intensity,” or leaving the company.
Musk began today under questioning from his defense lawyers and the plaintiff’s attorney, as they asked him about Tesla’s governance and the time he spent in the company, as well as his relationship with the board, which is supposed to be independent of Musk and. represent the shareholders. Musk has acknowledged his friendship with the board members, including some shared family vacations. Under cross-examination, Musk defended himself, saying he upheld his duty to increase Tesla’s market capitalization, but acknowledged that he sometimes does not seek board approval for public statements.
The lawsuit alleges that Musk’s massive wage package was unfair enrichment, and alleges that the board failed in its legal duty to act in the best interest of Tesla shareholders. The lawsuit describes Musk as a “part-time CEO,” leading other projects. One sticking point in the case is whether Tesla’s board is truly independent of Musk and represents shareholders, or if he has undue influence over the board to give him such a huge push.
Musk himself controls more than 20% of all Tesla shares outstanding, including untested options.
Musk initially denied on Thursday that he had essentially negotiated against himself over how many shares he would get in the pay package. (Negotiating against oneself would give Musk complete control over the outcome, and raise big questions about the board and whether it has fulfilled its fiduciary responsibilities.)
But plaintiff attorney Gregory Farallo then countered with some of what Musk said at one point regarding the wage package, “I think I’m negotiating against me.”
Then Musk admitted saying this. It was one of several occasions Farallo appeared to highlight inconsistencies in Musk’s statements, current and past.
After less than three minutes of questioning, Musk said he believes there was a consultation with the board of directors before changing his title to “Technoking.”
Farallo then reinstated Musk’s pitch in which Musk said he had not consulted with the board about the title change.
Musk also said in his testimony, which was answered in court Wednesday, that he was the one who came up with Tesla’s vision.
But in court Wednesday, Musk struck a different tone, objecting to the question being asked in a yes-no form.
“I think you are asking complicated questions where yes or no is possible. Yes is more accurate than no,” Musk said on Wednesday. “But your question is a complex question that is often used to mislead people.”
Farallo highlighted the degree of control Musk has over Tesla.
Musk said he did not seek approval when he announced a possible share buyback recently. He also said he did not seek approval to say he saw a path for Tesla to become more valuable than Apple and Saudi Aramco, the two most valuable companies in the world.
Plaintiff attorneys described the package this week as close to the gross domestic product of the entire state of Delaware, far more expensive than building the World Trade Center. They also compared Musk’s compensation to Tesla’s average salary, which they said was $40,000.
While the trial centered on Musk’s compensation, plaintiffs’ attorneys asked a variety of questions regarding his management of Tesla. Musk protested a question regarding when he tweeted about Tesla.
Farallo shot back, “We’re in for an interesting case, Mr. Musk.” So when your attorney wants to file an objection, they are entitled to do so, but unfortunately you don’t. I suspect he will if he doesn’t like the question.
The exchange resulted in a repeat catch of him Criticisms of the Securities and Exchange Commission.
Musk alleged on Wednesday that the “approval decree was issued under duress,” referring to a 2018 settlement with the Securities and Exchange Commission over Musk’s allegations that he obtained “secured financing” to acquire Tesla at $420 a share. An agreement concluded under duress is not valid as a basis for law.
At a TED conference earlier this year, Musk said he agreed to a settlement only because if he continues to fight the SEC, Tesla’s banks will cut funding at a time when they need cash. “I was forced [to lie] “To save Tesla’s life and that’s the only reason,” Musk said at the April event.
Then Farallo He was asked if Musk had any legal training. Musk described some familiarity.
“If you file enough lawsuits, you’ll do a few things along the way,” Musk said.
Tesla executives have defended Musk’s wage package in two days of testimony so far.
“It was about motivating him to achieve things that were bold and daring and putting his time and energy into that as opposed to his other interests,” Tesla Chairman Robyn Denholm testified on Tuesday. She said Musk was interested in financing interplanetary travel. Away from Tesla, Musk is also CEO of SpaceX and owner of Twitter, he also leads the Boring Company that specializes in digging underground tunnels, and he is the founder of Neuralink, which seeks to put computer chips in people’s brains.
Musk’s compensation package goals have been described as lofty and incredibly difficult to achieve.
Former Tesla CFO Deepak Ahuja called the plan “extremely high risk, high reward”.
“Although I believe deeply in Tesla, I felt that the level of difficulty with these milestones was so high that for a mortal like myself, I did not find this as a compelling incentive plan on a personal level,” Ahuja said.
Musk urged shareholders to agree to the plan, warning that he was “deeply upset” by the lack of support and that those who opposed it would not be welcome in any of his companies, according to emails read by the plaintiff’s lawyers in court.
Chris Isidore contributed to this story.
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