Last updated on March 2nd, 2023 at 11:55 pm
On Tuesday, attorneys for a Tesla shareholder sought a Delaware court to nullify a remuneration package for 2018 that was given to CEO Elon Musk by the firm’s board of directors.
This package has the potential to be worth more than $55 billion.
The attorneys for the shareholders believe that the pay package should be nullified because it was imposed by Musk and was the result of fake talks with directors who were not independent of him.
They also claim that the package was the consequence of such conversations.
In addition, they swear that shareholders authorized it even though a proxy statement provided them with false and incomplete information.
When making decisions, Delaware courts often defer to the “business judgment” of corporation directors even when there is no evidence that illegality occurred.
Nonetheless, Tesla defendants should be needed to demonstrate that the remuneration plan was “fully fair” to owners, according to attorney Greg Varallo’s argument.
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It is because Elon Musk is the dominant shareholder in the company.
The lawyers for the defense said that the pay plan had been relatively negotiated by a compensation committee whose members were independent.
That it had performance goals that were so high that some Wall Street investors laughed at them and that it had been approved by a shareholder vote that was not even required by Delaware law.
They further contend that Musk was not a controlling stakeholder at the time in question because he controlled less than one-third of the corporation.
After a trial in November, where Musk denied having anything to do with setting the terms of the compensation package or going to meetings where the board talked about the plan, its compensation committee, or a working group that helped make it, the arguments took place on Tuesday.
Musk also refuted that his ties with specific Tesla board members, which include the fact that they occasionally go on vacation together, indicate that those individuals are likely to do what he wants them to do.
According to the agreement, Musk would get billions of dollars if Tesla achieved the predetermined levels of market capitalization and operational milestones.

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Musk, who held around 22% of Tesla when the plan was adopted, was eligible to receive an amount of stock that was equivalent to 1% of the outstanding shares at the time the award was made for any instance in which Tesla concurrently met a market cap milestone and an operational milestone.
If the firm’s market valuation increased by $600 billion, his stake in the business would increase to about 28% of the company.
According to a post-trial brief filed by attorneys for the plaintiffs, Tesla has achieved all twelve market capitalization milestones and eleven operational milestones, providing Musk with nearly $28 billion in stock option gains.
This news comes after the attorneys for the plaintiffs filed their brief. Nonetheless, a mandatory holding term of five years is attached to the stock option awards.
Varallo conveyed to Chancellor Kathleen St. Jude McCormick his belief that Elon Musk ought to be compelled to return at least part of the stock option awards he has obtained, if not all of them.
Evan Chesler, the defense attorney, called the compensation package a “high-risk, high-reward” deal that was good for both Musk and Tesla shareholders, who have seen the value of the Austin, Texas-based company rise from $53 billion to more than $600 billion after briefly reaching $1 trillion the year before.

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Chesler said that Tesla ensured that the $55 billion pay figure was included in the proxy statement because the business wanted its shareholders to be aware that “this was a heart-stopping quantity that Mr. Musk might receive.”
“Nobody’s laughing now,” said Chesler, who pointed out that while some Wall Street investors bet against Tesla, the company’s leadership in producing electric vehicles has altered the car sector in the United States. “Nobody’s laughing now,” Chesler said.
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