Elon Musk, the founder and CEO of Tesla, defended his $50 billion compensation package on Wednesday, saying the ground-breaking business was in danger of failing at the time the deal was reached.
A shareholder has filed a lawsuit against Musk, Tesla, and certain board members, alleging that they improperly approved “the highest remuneration package ever offered to an executive.” Investors “expected we would fail and go bankrupt” around the time the pay agreement was authorized in 2018, according to Musk, who testified in a Wilmington, Delaware courtroom.
“At the time, we were in a difficult situation. The likelihood of survival was quite slim, and we were losing a lot of money, he remarked.
Musk gave testimony in the same Delaware court where he was fighting a Twitter lawsuit to make sure he completed his acquisition of the social media site. The South African entrepreneur has been under heavy scrutiny as a result of the $44 billion purchase of Twitter after he cut thousands of jobs, alarmed advertisers, and struggled to manage a rise in phony accounts.
Musk arrived covertly at the hearing in a black Tesla, which was waiting for him in a tent set up for the occasion behind the courthouse. He entered the building after passing through security a short while later while sporting a black suit and tie.
– ‘Unjustified enrichment’? –
Richard Tornetta, a shareholder, filed a lawsuit in the Tesla case alleging that the defendants had breached their obligations by approving the pay plan.
According to Tornetta, directors were not sufficiently autonomous from their star CEO to object to a deal worth almost $51 billion at recent share prices. Instead, Tornetta claims that Musk dictated his demands to them.
He also charges Musk with “unjustified enrichment” and has urged that a remuneration plan that helped the businessman become the richest person in the world be scrapped.
As the CEO of SpaceX, Neuralink, and The Boring Company in addition to Tesla, the lawsuit claims that Musk wasn’t even working for Tesla full-time. In response, Musk argued that Tesla’s investors were among the “most sophisticated in the world” and could monitor his management. He claimed that until the enormous success of the company’s Model 3 electric car, Tesla had been the laughingstock of the automotive industry and that electric vehicles were the way of the future.
“They believed that electric cars were a joke. They altered their plans as the Model 3 began gaining market share, he claimed, defending his plan for the business. After almost all of the company’s goals were achieved, Musk received Tesla stock options worth $52.4 billion over four and a half years, according to a legal filing. Musk argued that neither creating the package nor discussing it with the board members—some of whom were personal friends—who finally approved it was his responsibility.
Ira Ehrenpreis, the chairman of the remuneration committee on Tesla’s board of directors, testified at the start of the non-jury trial on Monday that the goals set were “extraordinarily ambitious and tough.”
At a time when Tesla was struggling to acquire traction, Ehrenpreis contended that the board intended to encourage Musk to concentrate on the company. Judge Kathaleen McCormick, who was to preside over the abandoned Twitter lawsuit, is presiding over the trial, which will last until Friday. Her judgment, which might take months, has no time limit.
She generally stood aside and let the questioning from the plaintiff’s and Musk’s attorneys go on as planned, but she intervened when she thought the mogul was giving incoherent replies.
I don’t think that was responding to the question, which I’ve forgotten now, but we can all listen to this all day because it’s so intriguing, she said.
