After five days of testimony, including three hours from Elon Musk, a Delaware judge will now decide whether Musk’s $56 billion pay package from Tesla Inc. was justified by the company’s explosive growth or undermined by a flawed process.
Musk and Tesla directors named as defendants have repeatedly testified that the package achieved what it set out to achieve — boosting the company’s stock price 10-fold and enriching investors and Musk.
“We thought if we could pull this off, if this plan were implemented, Tesla would be one of the most valuable technology companies,” Antonio Gracias, Tesla’s board member from 2007 to 2021, said Wednesday in the Delaware Court of Chancery. “It was a great deal for the shareholders.”
The trial aims to settle shareholder Richard Tornetta’s claims that the 2018 pay package from Musk, the world’s richest man, was dictated to subservient directors and approved by a vote of shareholders misled by Tesla.
The trial ended Friday as Musk struggled to oversee a messy overhaul of Twitter Inc, which he was forced to buy for $44 billion in a separate legal battle before the same judge, Chancellor Kathaleen McCormick.
“My feeling is that even though it went as far as the trial, a verdict will favor Mr. Musk,” said Eric Talley, a Columbia Law School professor who has been prosecuting the case.
It will be months before McCormick decides and her decision can be appealed to the Delaware Supreme Court.
During the week-long trial, directors said the pay package was designed to ensure Musk guided the electric vehicle maker through a critical period when he could have focused on his rocket company SpaceX or tunneling company The Boring Co.
Musk told the board he wanted a huge package to fund his dream of going to Mars or, as he put it, “making life multiplanetary to ensure the long-term survival of consciousness.”
Musk described his efforts to take the company from the brink of failure to exponential growth in 2017. “The amount of pain is beyond words,” Musk testified Wednesday.
Gracias recalled Musk celebrating his birthday in a factory conference room with a cake from the grocery store. “It was all on deck, 24/7, brutal,” he told the court.
The package allows Musk to buy 1% of Tesla stock at a deep discount each time escalating performance and financial goals are met. Otherwise Musk gets nothing.
Tesla has met 11 of the 12 goals as its value has briefly increased from $50 billion to more than $1 trillion.
Tornetta wants the plan to be canceled and shares granted under the plan returned to Tesla.
Much of the process focused on the information provided to shareholders prior to approving the plan. Tornetta’s lawyers tried to covertly show Tesla that three of the package’s goals were likely to be met quickly.
The plaintiff portrayed the directors as personal friends or business associates of Musk, who was the link to their fortune.
The directors tried to show that they could stand the line against Musk’s demands. However, evidence of obtaining concessions was limited to the best method of accounting for stock awards and the requirement that Musk hold his stock for five years.
“It wasn’t a mind-blowing, drawn-out affair,” Todd Maron said of salary negotiations in 2017 when he was general counsel.
Talley said Musk is a unique CEO and his pay reflects that.
“He’s like a Labrador Retriever. He sees a ball and runs after it. You could almost argue that they didn’t pay him enough for chasing after Twitter.”
(Except for the headline, this story was not edited by NDTV staff and was published by a syndicated feed.)
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