The legal teams of Tesla CEO Elon Musk and TSLA investor Richard Tornetta are expected to make their closing arguments on Tuesday. The shareholder, who held only nine TSLA shares when he filed his case in 2018, had alleged that the CEO dictated the terms of his pay package in order that he could meet its targets.
Musk’s current compensation plan was approved in 2018, and it involved an especially high-risk, high-reward system comprised of 12 tranches. The package allows the CEO to buy 1% of Tesla stock with a giant discount for each milestone that’s met. To this point, Musk has achieved 11 out of the 12 milestones outlined in his 2018 pay package. These milestones have contributed to Musk’s rising net value, effectively making him the wealthiest person on this planet.
The arguments on Tuesday followed a five-day trial in November, which featured testimony from Musk himself, in addition to other Tesla executives comparable to Board Chair Robyn Denholm. Tornetta’s lawyers had argued that the Tesla board must have offered a smaller pay package to Musk, or have not less than required the CEO to work full-time at Tesla. The investor’s legal team identified Musk’s work on other projects, comparable to his acquisition of Twitter then, of their arguments.
Tornetta ultimately seeks to have a few of Musk’s 2018 pay package rescinded or fully revoked.
Musk’s legal team, for his or her part, noted that because the CEO received his rewards, TSLA investors also saw their shares rise. These included the shares held by Tornetta.
While Musk’s pay package could seem excessive or shockingly generous today, it ought to be noted that the compensation plan was proposed at a time when Tesla was only a $59 billion company that was in the course of an especially painful Model 3 ramp. Its high-risk, high-reward nature meant that if Musk were to fail, he would get absolutely nothing for his efforts. It was then no surprise that the compensation plan was laughed off by Tesla skeptics when it was proposed. On the time, in spite of everything, the thought of Tesla being a $650 billion company seemed farfetched.
Tesla is value $659 billion today, and that’s after the corporate passed an especially difficult 2022.
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