Elon Musk’s $50B Trial Concludes Today – CNN | CarTailz


Washington, D.C
CNN

The trial for Tesla’s shareholder lawsuit examining CEO Elon Musk’s unprecedented compensation package will conclude this afternoon. While it is possible for the judge to issue a decision from the bench, it may take weeks or months to issue a decision.

Tesla awarded Musk a salary package in 2018 that helped make him the richest person in the world. The net worth of the compensation package is $50.9 billion today, after Tesla’s valuation has risen more than 1,000% since shareholder approval of the package at its peak.

Plaintiff Richard Tornetta originally filed the lawsuit in June 2018, alleging that Musk used his control of Tesla and the board to secure compensation to fund “his personal ambition to colonize Mars.” The Delaware Court of Chancery heard arguments in Wilmington this week.

Tornetta and his attorneys allege that Musk and the board failed to meet their financial responsibilities to shareholders. Tesla says its board has a legal responsibility for shareholders’ money, in addition to overseeing management, which includes Musk.

Tornetta argued that the huge salary package wasn’t necessary to incentivize Musk since he already owns the largest stake in Tesla.

Testimony was heard this week from a who’s who of Tesla insiders, including Musk, CEO Robyn Denholm, former CFO Deepak Ahuja, former board member Antonio Gracias, and board members Ira Ehrenpreis and James Murdoch.

Testimony continued Friday with expert witness Paul A. Gompers, a Harvard Business School professor specializing in finance. The plaintiffs arrived Friday with two hours and 13 minutes remaining to present their case and the defendants had three hours and 47 minutes to go.

Tornetta’s attorneys have highlighted the friendships between Musk and many of his board members who initiated the deal. Some have vacationed together at places like magician David Copperfield’s private island in the Bahamas, where Musk convened his brother Kimbal and Gracias in 2017 to decide whether James Murdoch should join Tesla’s board of directors, according to Kimbal’s testimony, available in court this week took place. Murdoch, who has described himself as a friend of Elon Musk since 2006, joined them for part of the trip on Copperfield’s Island and joined the board shortly thereafter.

Several corporate governance experts told CNN Business that Tesla’s board of directors clearly lacks independence from Musk.

“It’s safe to say that Musk has a lot of power — and probably too much power — over the Tesla board,” George S. Georgiev, a professor of corporate governance at Emory University Law School, told CNN Business. “The Tesla board has been extremely lenient despite Musk’s many transgressions over the years, including his skirmishes with the SEC.”

Tesla CEO Denholm, after extensive questioning, revealed in her testimony that she was unaware of the details of how Musk is managing an SEC agreement that required him not to tweet about certain topics, such as Tesla’s financial condition and new businesses, it was because he obtained pre-approval from an “experienced securities attorney.”

Musk said in his statement that he sends certain tweets for approval and publishes them if he hasn’t heard from them within an indefinite period of time. This arrangement leaves open the possibility of Musk’s tweets being released without the required verification.

Denholm first joined Tesla’s board of directors in 2014 and became its chairman in 2018 when Musk agreed to step down from that position following SEC indictments. She said in her statement that she interviewed Musk before joining the board.

Georgiev said there is not much precedent for cases like this because they are either dismissed or settled.

The Tesla board members who testified generally spoke of the huge pay package as necessary to keep Musk at Tesla.

“He has 100 company ideas in his head. I promise you, he’s done very few of them,” Gracias testified. “And we wanted him to focus. We needed him focused.”

Musk is also CEO of SpaceX and founded a tunneling and transit company, the Boring Company, as well as Neuralink, which is working to put computer chips in brains. Musk recently acquired Twitter for $44 billion and calls himself its “Chief Twit.”

Musk’s brother Kimbal had a slightly different take on his testimony. At the time of the 2018 compensation package, Kimbal said it was “very unlikely” that Elon would step down from his role as CEO at Tesla.

“He is accountable to the company’s shareholders. That’s just not how Elon works,” said Kimbal Musk.

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