The world’s richest man is set to testify this week in a trial that began Monday alleging he, Tesla and its board members breached their duties by granting Musk stock options worth nearly $56 billion dollars. The proceedings come just weeks after the 51-year-old took control of Twitter, adding the social media company to an ever-expanding list of businesses he is at least nominally in charge of, including Tesla, SpaceX, Neuralink and The Boring Company. . Lawyers for the Tesla investors who filed the lawsuit argued that Musk’s growing portfolio meant he was too thin to be considered the car company’s full-time CEO, let alone worthy of an award they claim “dwarfs every CEO’s pay packet.” Advisor of another public company”. The lawsuit was filed before Musk’s $44 billion deal for Twitter. Musk will also face a claim that his compensation package, described by the plaintiffs as the “largest . . . in human history,” he was awarded in 2018 by a “supine” board made up mostly of his friends, and that an independent set of directors would have vetoed such a plan. Attorneys representing the board members did not respond to a request for comment. Prominent attorneys ISS and Glass Lewis condemned the package at the time, the latter concluding that “any relevant comparison of the size of the grant would be akin to stacking nickels against dollars.” Glass Lewis also noted that Musk already owned more than a fifth of Tesla and had sufficient incentives to grow the company. Ultimately, the package — dubbed a “CEO performance award” by Tesla — was voted down by shareholders, awarding Musk 12 installments of his stock, each representing 1 percent of the automaker’s equity. Eleven of the 12 tranches vested when the group’s capitalization, revenue and profitability reached certain levels. Both Tesla compensation committee chairman Ira Ehrenpreis and former general counsel Todd Maron were questioned for several hours Monday about the decision-making process that led to Musk’s pay award. When asked if Musk was to be believed when he claimed in a preliminary filing that he was negotiating against him over how many stock tranches he would receive, Ehrenpreis quipped, “I guess it’s an effective negotiation when the bond thinks it was their idea.” Ehrenpreis also said he was unaware that Musk had allegedly asked Maron to call shareholders and tell them to vote in favor of the plan, and admitted he would have been concerned if he had known. Among the investors who did not vote in favor of the multibillion-dollar pay plan was Capital Group, Ehrenpreis confirmed. The company remains one of the largest active outside investors in Tesla with a stake of more than 3 percent. Capital Group did not immediately respond to a request for comment Musk’s lawyers argue that his stock compensation plan “was designed to maximize shareholder value by providing incentives [him] to focus his efforts on transforming Tesla” at a time when the fast-growing automaker’s future remained uncertain. In a brief preliminary hearing, they said Musk never took a cash salary at Tesla and that the stock pay plan served his purpose. The company’s market value has jumped more than 1,200 percent to nearly $700 billion since 2018, though it has recently fallen to around $600 billion. “There are no comparable executives,” Musk’s lawyers argued, adding that there are also “no comparable companies.” Recommended But the case will be closely watched by businesses across the U.S., which fear a victory for Tesla shareholders will trigger a wave of similar challenges in Delaware, where most of the nation’s public companies are based. But Rupert Russell, a partner at the law firm Shartsis Friese, said he did not see the Tesla case “as a precedent for the rest of corporate America” because of the size of the pay program and Musk’s unique position. He added that Musk is “definitely taking a risk by not settling the case” especially since he “essentially gave in to the previous cases heard by the same judge.” This week’s trial will be held before Kathaleen McCormick, who oversaw the case in which Twitter accused Musk of wrongfully backing out of a $44 billion deal to buy the tech group. It finally agreed to proceed with the acquisition last month, days before a court deadline to close the deal or set a trial date in November. Musk has sold nearly $20 billion of his Tesla stock since launching the takeover bid for Twitter, which is saddled with billions of dollars in debt and which the billionaire said was now losing about $4 million a day. Tesla’s stock price has fallen more than 50 percent this year. While the stock options granted to Musk as part of his compensation plan do not contain clawback provisions, the plaintiffs want them voided, which would increase the value of Tesla’s remaining equity.
