Elon Musk is facing trial in April after a Tesla the shareholder filed a lawsuit against him and the company over the 2018 CEO’s salary package, which was worth about $ 2.5 billion at the time.
Shareholder Richard Tornetta filed a lawsuit against Musk and members of Tesla’s board in 2019 after the package was cleared.
He claims that the Tesla board violated its fiduciary duty by awarding excessive compensation to Musk. Torneta demanded that the payment package be canceled and that Tesla’s board be redesigned to better protect investors.
Under the compensation scheme, Musk won more than $ 700 million in 2020, one of the highest in US history.
Now, nearly three years after Tornetta filed a lawsuit against Musk and members of Tesla’s board, a judge has ruled that the case will be heard on April 18 in Delaware’s clerical court. CNBC.
Elon Musk is facing a lawsuit after a Tesla shareholder filed a lawsuit against him and the company over the 2018 CEO’s salary package, which was worth about $ 2.5 billion at the time.
The lawsuit was filed against Musk and board members, including James Murdoch, son of media module Rupert Murdoch, Musk’s brother Kimball Musk and Tesla directors Brad Buss and Robin Denholm, according to Plainsite.
Musk’s lawyers asked the court to dismiss the claims and asked for an abbreviated court decision, but this was denied by Chancellor Kathleen St. J. McCormick, who said the case would be heard.
McCormick wrote in a letter: “I am skeptical that this lawsuit can be resolved on the basis of indisputable facts. I therefore set aside the oral arguments on the claims for an abbreviated judgment. This case will be tried.
The Tornetta case focuses on a bold compensation package approved by Tesla’s board in 2018.
The compensation award does not include a salary or cash bonus for billionaire Silicon Musk, but sets rewards based on Tesla’s market value to rise to $ 650 billion over the next decade and allows Musk to buy heavily reduced shares of Tesla.
Torneta claims that the board members violated their fiduciary duty in approving the package and that the package unfairly enriched Tesla’s CEO.
Tesla’s compensation committee, which the company acknowledged was not independent of Musk, negotiated the package – and Tornetto argued that this lack of independent oversight meant it was unfair.
Shareholder Richard Tornetta has filed a lawsuit against Musk and members of Tesla’s board after the compensation package was cleared. Pictured: The Tesla plant in Fremont, California
In 2020, Musk won a performance-based reward of more than $ 700 million.
The payout was triggered by the company’s achievement of several financial indicators, which include reaching $ 20 billion in total revenue for the previous four quarters.
The payment was one of the largest corporate payment packages in US history and is only the first of 12 different packages that Musk will receive if Telsa meets different financial goals.
Under the compensation package, which includes stock options that invest in 12 tranches, Tesla’s market value must rise to $ 100 billion for the first tranche it will receive and increase by an additional $ 50 billion for the others. The package does not require Tesla to reach profitability.
Tornetto claims that the members of Tesla’s board that approved the compensation package had unresolved conflicts and did not disclose all information to shareholders before a power of attorney vote on the pay plan.
He also claims that Musk was assisted in creating the payment plan by his former divorce lawyer Todd Maron, who was Tesla’s general council. Maron has since left the company.
The compensation scheme is “unfair and” completely unnecessary “, Torneta said in the lawsuit, adding that Musk already has a large share of the company’s capital.
The plan was “beyond reasonable judgment and inexplicable on grounds other than bad faith,” the lawsuit said.
Musk’s compensation package passed shareholder approval with about 73 percent of the vote, with the exception of Musk and his brother Kimball.
The result of the vote showed that some, but not all, large investors are willing to support a large payout in the company run by the founder.
At the time, proxy consultancy firm Institutional Shareholder Services recommended voting against the compensation, noting that if it was achieved, the Musk Award would surpass anything previously provided to senior US officials.
DailyMail.com contacted Tesla and lawyers representing Tornetta for comment.