The trial of Tesla shareholders’ lawsuit examining CEO Elon Musk’s unprecedented compensation package will close on Friday afternoon (18).
While it is possible for the judge to issue a court decision, it may take weeks or months for a decision to be made.
Tesla awarded Musk a pay package in 2018 that helped make him the richest person on earth.
The net worth of the compensation package is $50.9 billion today, after Tesla’s valuation soared more than 1,000% from its peak since shareholders approved the package.
Plaintiff Richard Tornetta originally filed the lawsuit in June 2018, alleging that Musk exploited his control of Tesla and the board of directors to secure compensation to “fund his personal ambition to colonize Mars”.
The Delaware Court of Chancery heard arguments this week in Wilmington.
Tornetta and his lawyers allege that Musk and the board failed to meet their financial responsibilities to shareholders.
Tesla says its board of directors has legal responsibility for shareholders’ money, as well as overseeing management, which includes Musk.
Tornetta argued that the huge pay package was not necessary to incentivize Musk, as he already owned the largest stake in Tesla.
Testimony was heard this week from who’s who of Tesla insiders, including Musk, chairman Robyn Denholm, former chief financial officer Deepak Ahuja, former board member Antonio Gracias and board members Ira Ehrenpreis and James Murdoch.
The testimony resumed on Friday with expert Paul A. Gompers, a professor at Harvard Business School specializing in finance.
The plaintiffs entered Friday with two hours and 13 minutes left to present their case, and the defendants had three hours and 47 minutes left.
Tornetta’s lawyers highlighted the friendships between Musk and many of his board members who created the deal.
Some have vacationed together in places like magician David Copperfield’s private island in the Bahamas, where Musk called his brother Kimbal and Gracias in 2017 to determine whether James Murdoch should join Tesla’s board, according to Kimbal’s testimony that was featured at the court this week.
Murdoch, who has described himself as a friend of Elon Musk since 2006, joined them on Copperfield Island for part of the trip and joined the board soon after.
Several corporate governance experts told the CNN Business that it’s clear that Tesla’s board of directors is not independent of Musk.
“It’s safe to say that Musk has a lot of power — and probably a lot of power — over Tesla’s board,” George S. Georgiev, a professor who studies corporate governance at Emory University’s law school, told CNN Business 🇧🇷
“Tesla’s board has been extremely forgiving despite Musk’s many transgressions over the years, including his skirmishes with the SEC.”
Denholm, Tesla’s chairman, revealed after extensive questioning in his deposition that he was unaware of the details of how Musk handles an SEC settlement that required him not to tweet about certain topics, such as Tesla’s financial condition and new lines of credit. business, unless he obtained pre-approval from an “experienced securities attorney”.
Musk explained in his deposition that he submits certain tweets for approval and posts them if he doesn’t receive a response in an unspecified time frame. This arrangement leaves open the possibility that Musk’s tweets could be published without the necessary proofreading.
Denholm joined Tesla’s board in 2014 and became its chairman in 2018, when Musk agreed to step down following the SEC’s allegations.
She said in her deposition that she interviewed Musk before joining the board of directors.
Georgiev said there isn’t a lot of precedent for cases like this because they get filed or resolved.
Tesla board members who testified generally spoke of the huge pay package as necessary to keep Musk engaged at Tesla.
“He has 100 business ideas in mind. I promise you he made very few of them,” testified Gracias. “And we wanted him focused. We needed him focused.”
Musk is also the CEO of SpaceX and has created a tunneling and transit venture, the Boring Company, as well as Neuralink, which is working to put computer chips in brains. Musk recently acquired Twitter for $44 billion.
Musk’s brother Kimbal had a slightly different opinion in his deposition. At the time of the 2018 compensation package, Kimbal said it was “very unlikely” that Elon would step down as CEO of Tesla.
“He is accountable to the company’s shareholders. This is not how Elon operates,” said Kimbal Musk.
Source: CNN Brasil
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