Posted by Jacob Hummel.
Tesla CEO, Elon Musk, has made headlines again recently. This time for a legal dispute over a 2018 compensation package that would award Musk potentially upwards of $55 billion in Tesla stock. A Tesla stockholder, Richard J. Tornetta, is taking legal action in Delaware Court to invalidate the package. His lawyers argue that the compensation should be voided because it was “dictated by Musk and a product of sham negotiations with the directors who were not independent of him” (Chase). They also argue that the shareholders approved it based on misleading and incomplete information.
The Defense argued that the deal was fairly negotiated by parties whose members were independent and denied Musk’s involvement. At the time of the negotiation, Musk was not a controlling shareholder, because he owned less than a third of the company, limiting the influence he would’ve had on the executives crafting the package. In addition, they argued that it also passed through a shareholder vote, which wasn’t even necessary under Delaware law. Musk himself, in an earlier November trial, denied that he had any involvement with the board or its compensation committee, and stated that he did not dictate the terms of the compensation package.
Defense attorney Evan Chesler argued the package benefited not just Musk, but all shareholders, who in the time of the package’s existence have seen Tesla’s value climb from around $50 billion to over $600 billion. Finally, the defense also claimed that the shareholders were informed of the potential compensation Musk could receive before they voted on the package. This was supposed to be the cases’ final day in court. However, after the hearing on February 21, the court ordered another round of briefing on various legal issues.
Jacob is a freshman at the Stillman School of Business, Seton Hall University, majoring in Finance.
Musk’s Tesla pay package is now worth more than $30 billion – Yahoo Finance. Yahoo! Finance, Yahoo!, 12 Feb. 2023,