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Elon Musk and Tesla face trial more than CEO's multibillion-dollar pay package from 2018

Tesla CEO Elon Musk faces trial over his multi-billion-dollar pay package

March 4, 2022: -Tesla and Elon Musk are facing a trial over the CEO’s 2018 pay package, which was worth around $2.5 billion when it was granted.

After the package was cleared, shareholder Richard J. Tornetta sued Musk and the Tesla board. The suit claimed it was excessive, and said authorization by the electric car company’s board of directors amounted to a breach of its fiduciary duty.

Musk’s 2018 CEO performance award consisted of 101.3 million stock options in 12 milestone-based tranches. The plan said that Musk would be paid only if he reached those milestones, focusing on Tesla’s market value and operations. Otherwise, the CEO would receive nothing.

Tesla shares skyrocketed, and payouts to Musk started in 2020, helping make him the world’s richest person.

Tornetta seeks to invalidate the option grant from the 2018 plan, which has netted Musk tens of billions of dollars worth of stock at present value.

The shareholder alleged that Tesla board members had undisclosed conflicts and said that Musk crafted his pay plan with the personal assistance of his former divorce attorney Todd Maron, Tesla’s general counsel. Tornetta claimed that Tesla’s board did not disclose all the information it should have to shareholders before a proxy vote to approve the payment plan.

Maron left the company in 2018, and Tesla hasn’t had a general counsel since December 2019.

Attorneys for Musk asked the court for a summary judgment and sought to dismiss the case. But in a letter dated February 24, court chancellor Kathleen St. J. McCormick wrote, “I am skeptical that this litigation can be resolved based on the undisputed facts. So, I am canceling oral argument on the summary judgment motions.” She added.

A trial has been scheduled for April 18, in the Delaware chancery court, according to filings published by legal transparency database PlainSite. That date could change. PlainSite is owned by Aaron Greenspan, who previously disclosed a Tesla short position.

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