The lawsuit over Tesla’s more than $55 billion (about 53.3 billion euros) compensation plan began on Monday in a Delaware court in the U.S. state.
The lawsuit alleges that the performance-based stock options were negotiated by a compensation committee and approved in 2018 by Tesla board members who had a conflict of interest due to personal and professional ties to Musk.
The lawsuit, filed almost four years ago, also alleges that the shareholder voted to approve this compensation based on an incomplete or misleading proxy statement.
The plaintiff alleges that the attorney erroneously characterized the members of the compensation committee as “independent” and characterized all of the targets that led to the acquisition of the stock options as “stretched” targets that should be difficult to achieve, even if internal projections indicated that the three were likely to be achieved within 18 months after the vote of the shareholders.
During the court hearing, Musk claimed that while production at the plant struggled to increase, his time was “almost entirely devoted to Tesla.”
“Probability of Survival [do grupo] was extremely low,” recalled the multimillionaire, who regularly says that the manufacturer was very close to bankruptcy in 2018.
The entrance to the court was discreet, after arriving in a black Tesla. In a black suit and tie, the businessman answered questions for about two and a half hours.
Plaintiff’s lawyer Greg Varallo spent most of the cross-examination trying to get Musk to admit that he controls Tesla to the point where he can influence the board of directors to do his bidding.
Tesla’s CEO said he had no role to play in the compensation plan, did not attend meetings on the matter, and was unaware of the internal process by which the company determined the highest compensation ever recorded for a public company.
The businessman added that he does not want to be “the CEO of any company” and that such a title is not suitable to describe his work at Tesla or SpaceX, a rocket and spacecraft company.
When confronted with questions from a prosecutor, Musk admitted he did not consult Tesla’s board of directors when, in March 2021, he identified himself as the company’s “Technoking” (tech king) in white papers filed with the U.S. Securities and Exchange Commission. (SEC, in English)
The decision is the result of a lawsuit filed by Richard Thornetta, a Telsa shareholder, who believes the reward is excessive and that Musk got it because of the power he has over the company and the board of directors, as he is one of its major shareholders.
Under the plan, Musk could receive billions of dollars if the electric vehicle and solar panel maker meets certain operating and market capitalization targets.
For each time the market cap and operating target are met simultaneously, Musk, who already owned about 22% of Tesla at the time the plan was approved, would receive shares equal to 1% of the shares outstanding at the time of grant.
Musk’s stake in the company would increase to around 28% if Tesla’s market capitalization grew by $600 billion (about 581 billion euros).
Each goal of the plan includes increasing Tesla’s market capitalization by $50 billion and achieving an aggressive target of growth in revenue or pre-tax profit.
Musk will only receive the full benefits of the $55.8 billion (€54 billion) payout plan if Tesla reaches a $650 billion (about €629 billion) market capitalization and revenue and earnings unprecedented in a decade.