Tesla Boss Elon Musk will take his stand in a trial against him and the company’s board alleging that Musk’s $56 billion Tesla Inc pay package was based on easy-to-achieve performance targets that investors were duped into approving. On Monday, the five-day trial has begun; on Wednesday, Musk will defend against claims in a Delaware court. The controversial pay package is the largest compensation awarded to anyone on Earth from a publicly traded company.
In 2018, company’s shareholder Richard Tornetta sued Musk and the board alleging that Musk used his dominance over the electric vehicle maker’s board to dictate terms of the 2018 package. The trial’s focus will be whether the compensation package requires Musk to work full-time at Tesla, as Musk, other than Tesla, is also overseeing SpaceX, The Boring Company, Neuralink, and newly acquired Twitter. Tornetta’s attorney Greg Varallo said Musk’s package was $20 billion larger than the annual gross domestic product of the state of Delaware.
The compensation package awarded Musk a 10-year grant of stock options that vest over 12 tranches dependent on the company meeting specific market capitalization. The CEO receives about 1% of Tesla’s stock in options for every tranche. Tornetta alleged that Tesla misled the public by suggesting its targets were difficult when, in fact, the company had always expected to meet them.
The defendants, which include Musk and the company’s directors, have denied the allegations, arguing that the pay package ensured the entrepreneur would guide Tesla through a critical period, which helped drive the stock tenfold higher. During the trial, a Tesla board member since 2007 and chair of the committee that oversaw the pay package, Ira Ehrenpreis explained the thinking behind the record-breaking compensation deal and said the Tesla board recognized in 2017 that the CEO was a “serial entrepreneur” and wanted to make sure he didn’t leave the company to pursue other interests. “We wanted Elon to be at the head of Tesla for a long time,” Ehrenpreis testified.
The trial comes at a time when Musk has been busy with Twitter after completing his $44 billion acquisition of the social media company in late October.