Elon Musk's lawyers say his $50 billion Tesla pay package is justified because he's 'not the typical CEO' as a November trial approaches

  • Elon Musk’s lawyers say the billionaire’s over $50 billion Tesla compensation plan is justified.
  • Musk faces a trial in November over a lawsuit from an investor regarding his 2018 pay package.
  • The pay plan is structured around Tesla’s performance goals and includes over 100 million stock options.

Elon Musk’s lawyers said Tesla’s decision to give him a pay package worth over $50 billion is because no one else could have made the electric-car maker’s value soar the way that Musk has.

The billionaire CEO is set to go to court on November 14 over a lawsuit from Tesla investor Richard Tornetta that argues Musk and the automaker breached their fiduciary duties by awarding Musk a pay package that was  “beyond the bounds of reasonable judgment.”

The lawsuit was filed in June 2018 and was sent to trial earlier this year.

“The 2018 Plan was designed with Musk in mind,” Musk’s lawyers said in a pretrial brief filed Tuesday. “The Plan designed and approved by the Board was not a typical pay package intended to compensate the ordinary executive for overseeing the day-to-day operations of a mature company. That is because Musk is not the typical CEO.”

In the 92-page document, Musk’s lawyers argue that the Tesla CEO’s pay package was required to secure his focus on Tesla and “closely resembles a high-reward venture capital investment in Musk as an asset to Tesla” during a time when the carmaker’s “survival was uncertain.”

In the initial complaint, Tornetta argued that it was a conflict-of-interest that Musk was able to design his own pay package.

Musk’s lawyers said the billionaire has distinguished himself as Tesla’s CEO and has been “intimately involved in all aspects of Tesla’s operations, from its strategic direction to its product design.”

“He has been instrumental in transforming Tesla from a high-end electric sports car manufacturer to far more than just a car company,” the filing said. “The Board understood that an investment in Musk could reap massive rewards for Tesla’s stockholders.”

Musk does not receive a salary from Tesla and his pay package centers on a series of goalposts around the carmaker’s financial growth which was set in place about four years ago. Specifically, the plan involves a 10-year grant of 12 tranches of stock options, which are vested when Tesla hits certain targets.

When each milestone is passed, Musk gets stock equal to 1% of outstanding shares at the time of the grant. The company has since surpassed the metrics as its market value surged from $53 billion to over $690 billion, Musk’s lawyers said in the court filing.

Ultimately, Musk’s lawyers argued that Tornetta’s shares in Tesla have soared over 1,000% to date since the billionaire’s compensation plan was established in 2018.

Lawyers for Tornetta also filed a pretrial brief under seal, a version of which will be made public on November 1, they said. Tornetta’s lawyer declined to comment, saying he would let the brief “speak for itself.”

The five-day trial will take place with Delaware Chancery Court Judge Kathaleen St.J. McCormick presiding over the case — the same judge that has overseen Musk’s court battle with Twitter.

Musk — the richest man in the world — is currently worth about $211 billion, per the Bloomberg Billionaire Index. The majority of his wealth is tied up in Tesla equity.

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