Musk to give evidence in lawsuit over Tesla compensation package

Tesla Chief Executive Elon Musk is defending himself in a shareholder lawsuit challenging a pay package awarded to him by the company’s board that could be worth more than $55bn (£46bn).

Mr. Musk has denied that he dictated the terms of the compensation package or attended any meetings where the plan was discussed by the board, compensation committee or working group that helped develop it.

“I’m completely focused on the execution of the company,” he said.

The plaintiffs’ attorney, Greg Varallo, spent much of the early cross-examination trying to get Mr. Musk to admit that he controlled Tesla to the extent that he could influence the board to carry out his orders.

Among other things, Mr. Varallo asked Mr. Musk about his “Technoking” title, a role Mr. Musk has previously noted comes with “magnificence” and “great dance moves.”

“I think comedy is legit,” Mr. Musk told Mr. Varallo, who had questioned whether Mr. Musk was “very sober” when he came up with the title.

Mr Varallo also said that one of the reasons Mr Musk had a “master plan” for Tesla was to let people know he was in charge.

He also pointed to Mr. Musk’s recommendations on executive pay and his unilateral decision to suspend Tesla’s policy of accepting bitcoin from car buyers.

“You’re asking complex questions that can’t be answered with a ‘yes’ or a ‘no,'” Mr. Musk said when Mr. Varallo asked him if he had come up with Tesla’s vision.

Musk said he never intended to be CEO of Tesla, or any other company, preferring to think of himself as an engineer.

He also said he expects Twitter’s organizational reorganization to be completed in the next week or so.

“Are we in the Tesla experiment or the Twitter experiment?” Mr Musk wondered briefly, casting a quick glance at Chancellor of the Exchequer Catherine St Jude McCormick.

Ms. McCormick also presided over a lawsuit Twitter filed against Mr. Musk earlier this year to force him to honor an agreement to buy the social media giant.

Ms. McCormick dismissed the lawsuit this week after Mr. Musk closed the deal, before declaring herself “Chief Twit.”

Musk also played down the suggestion that his friendships with certain Tesla board members, including sometimes taking vacations together, meant they might do his bidding.

Holiday, he said, might be too strong a word for the kind of time he spends with directors.

“To me, it’s an email with a point of view,” he said.

The Tesla lawsuit alleges that performance-based stock option grants were negotiated by the Compensation Committee and approved by Tesla board members who had personal and professional ties to Mr. investment) and a conflict of interest exists.

It also claimed that the shareholder vote to approve the compensation plan was based on a misleading proxy statement.

Shareholder plaintiffs allege the attorneys mischaracterized compensation committee members as “independent” and described all milestones triggering stock option grants as unattainable “stretch” goals, even though internal forecasts indicated that three operational milestones could fall within Achieved within 18 months of shareholder vote.

Lawyers for the defendants pointed to two institutional proxy advisory firms urging shareholders to reject the plan, noting that it would require “significant, perhaps historic accomplishments” and growth that “appears to be stretched by any benchmark.”

The plan calls for Mr. Musk to receive billions of dollars if Tesla hits certain market capitalization and operational milestones.

Mr. Musk, who owned about 22% of Tesla at the time the plan was approved, will receive shares equal to 1% of the shares outstanding at the time of grant, for each event that both market-cap milestones and operational milestones are met.

His stake in the company would increase to around 28% if the company’s market value grows by $600bn (£505bn).

Each milestone in the plan includes adding $50bn (£42bn) to Tesla’s market capitalization and achieving aggressive revenue and pre-tax profit growth targets.

Mr Musk will receive the full benefit of the pay package, or $55.8bn (£46.7bn), provided Tesla reaches a $650bn (£547bn) market capitalization and unprecedented revenue and earnings within a decade.

Tesla has hit all 12 market capitalization milestones and 11 operational milestones to date, leading to the awarding of 11 of 12 grants and more than $52.4bn (£44.1bn) in stock options for Mr Musk proceeds, according to the lawsuit.

Since the grant, Tesla’s market capitalization has increased from $59bn (£49.7bn) to more than $613bn (£516bn) now, having briefly reached $1tn earlier this year.

Mr. Musk has sold Tesla stock to finance the Twitter acquisition, adding to the downward pressure on the share price.

Shares in Tesla and other carmakers have been hammered this year, but the Austin, Texas-based company will rake in $5.5bn (£4.6bn) in 2021, wiping out the previous year’s $721m. US$ (£607m) profit.

It also produced a record 936,000 vehicles, almost double the amount produced in 2020.

Lawyers for the plaintiffs said it was unnecessary to incentivize Mr. Musk to stay at the helm by offering huge compensation packages because he never suggested he might leave.

They also said Mr. Musk’s real motivation in negotiating the package was to fund his dreams of colonizing Mars.

In a November 2017 email to Tesla’s former general counsel Todd Malone, Mr. Musk expressed optimism that the compensation package would be viewed favorably.

“Given that this will all be used for reasons that at least ideally maximize the possibility of a better future for humanity, and that all Tesla shareholders will be very happy, I think this will be welcome,” he wrote. Said, “It should come as a super optimistic view of the future”.

On the witness stand, Mr. Musk also said he did not want to be CEO of any company.

According to multiple media reports, Musk said: “I hope to reduce my time at Twitter and find someone else to manage Twitter.”