Elon Musk’s potential $56-billion payday must be defended by Tesla board in court

A Delaware judge has ruled that the electric car company Tesla’s board of directors should stand trial to defend CEO Elon Musk’s multibillion dollar pay package.

Tesla was sued by a shareholder in June 2018 over allegations of corporate waste and unjust enrichment. On Friday, a judge denied the company’s request to dismiss the lawsuit.

While Tesla disputed how much the package is worth, “it is reasonably conceivable” that the award is “well in excess of that paid to Musk’s peers,” wrote Vice Chancellor of the Delaware Court of Chancery Joseph Slights. He dismissed the shareholder’s allegation that awarding Musk was equivalent to corporate waste.

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Tesla’s board said last year that it created the pay package to incentivize Musk to grow the firm’s market capitalization.

“The basic premise is simple, Elon’s compensation will be 100% aligned with the interests of our stockholders,” said the board.


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In March 2018, Tesla’s shareholders approved Musk’s package with about 73 percent votes in favor, excluding votes from Musk and his family. The approved pay package stood at $2.6 billion but if Tesla’s market value ballooned (as the payment plan predicted), then, according to a public filing, those stock awards could be worth nearly $56 billion.

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Musk tweeted in May that after paying for Tesla’s expenses he was actually at “net negative” compensation.“Elon actually earned $0 in total compensation from Tesla in 2018, and any reporting otherwise is incorrect and misleading,” the company confirmed in a July statement.

Slights said he would take all of these factors into consideration at trial.

Tesla has been burning through cash at alarming levels, reporting some of its worst quarters on record this year. Tesla lost nearly $700 million in the quarter ending March 31 and a bigger-than-expected loss of $408 million in the second quarter. Over a 15 year-period Tesla has racked up $5 billion in losses.

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