Elon Musk and his lawyer friends have to turn over documents they shared among each other before Musk was awarded a $50billion-plus pay package as part of an ongoing lawsuit to find out who approved the the CEO’s big 2018 pay day.
Shareholders, represented by Richard Tornetta in court documents, accused Musk and Tesla’s board of directors of ignoring their responsibilities to the shareholders by ‘granting unjust enrichment to Musk and wasting corporate assets.’
They said Tesla general counsel Todd Maron, who was Musk’s former divorce attorney, and deputy general counsel Jonathan Chang were in cahoots to advance Musk’s interests and negotiated on his behalf against the board’s compensation committee.
‘Leveraging his control, close personal relationships, and reputation for retribution, Musk co-opted Maron and Chang to help him structure the plan free from committee involvement,’ plaintiffs’ attorneys wrote in a court document.
To prove it, they wanted to see communications Musk sent to and from Maron and Chang before the board approved Musk’s $50 billion deal.
Delaware Vice Chancellor Joseph Slights Jr. agreed with this part of the plaintiffs’ motion and ordered those documents to be released.
Elon Musk and his lawyers were ordered by a Delaware judge to turn over documents that Musk either sent or received to or from two lawyers before the CEO’s $50 billion pay package was approved in 2018
Vanessa Lavely, an attorney representing the Tesla directors, told Slights that the board followed ‘a robust process’ to develop and approve the compensation plan.
‘There was absolutely no rubber-stamping here, and the defendants look forward to the opportunity to present this record to the court,’ she said.
But Gregory Varallo, attorney for the plaintiffs, told Slights on Monday that they still don’t have an answer to a simple question: ‘Whose idea was the largest compensation plan ever designed?’
‘If you read the record to date, no one seems to know,’ said Varallo. ‘There was quite a lot of sausage-making taking place before this was even a twinkle in the eye of the compensation committee.’
In Slights’ motion, he limited the scope of document release.
He refused to order other communications among board members, Chang and Maron, and an outside law firm to be turned over and denied access to a broader range of other documents that defense attorneys argued are protected by attorney-client privilege.
The judge said there was no basis for him to order the production of documents that may be protected by attorney-client privilege.
Tesla shareholders filed a civil lawsuit to find out who authorized Elon Musk’s $50 billion pay package in 2018.
Tesla’s stock price dipped after the market opened on Tuesday
Under the 2018 plan approved by the board, Musk stands to make billions if Tesla hits its ambitious market capitalization and operational milestones.
For each of 12 milestones the company achieves, Musk, who already owned more than 20 per cent of Tesla when the plan was approved in 2018, would get stock equal to 1 per cent of outstanding shares at the time of the grant.
Each milestone includes growing Tesla’s market capitalization by $50 billion and meeting aggressive revenue and pretax profit growth targets. Musk would receive the full benefit of the pay plan, $55.8 billion, only if he leads Tesla to a market capitalization of $650 billion and unprecedented revenues and earnings within a decade.
Just last week, Musk earned a performance-based compensation payment worth more than $700million, the company confirmed Thursday.
The payout was triggered by the company reaching several financial metrics which included hitting $20 billion in total revenue for four previous quarters.
The shareholders challenged the pay package in a 2018 civil case in Delaware, which Musk and his lawyers attempted to dismiss, which failed in 2019.
Musk’s windfall comes just two weeks after he listed five California properties for a combined $97.5million and placed two Bel Air homes on the market for $39.5million following a Twitter rant where he vowed to sell off his material possessions.
Musk tweeted last May that he was selling his properties, like this one in Bel Air, and ‘Devoting myself to Mars and Earth’
Just last week, Musk earned a performance-based compensation payment worth more than $700million
In a series of tweets on May 1, 2020, the Tesla founder announced that he intends to sell ‘almost all physical possessions’.
‘Will own no house,’ Musk wrote. Just days later on May 4, it was revealed that the billionaire had listed two Bel Air properties on Zillow.
On May 13, Musk listed five more homes for sale. Four of the Los Angeles homes were listed on Zillow as a multi-property listing with an asking price of $62.5million.
Musk assured his millions of followers that the selling of his possessions was not financially motivated.
‘Don’t need the cash. Devoting myself to Mars and Earth. Possession just weigh you down,’ Musk tweeted.
Tesla’s share price skyrocketed over the past year despite, and it had a booming first quarter despite a rash of public crashes involving the Autopilot that prompted multiple federal investigations.
It passed Facebook in net worth as the fifth most valuable company on Wall Street, with only Apple, Microsoft, Amazon and Alphabet worth more, Quartz reported in January.
‘Possession just weigh you down,’ Musk tweeted last May after selling a host of properties
He sold this sprawling Bel Air property that’s served as his main residence in an all-cash deal for $29 million, which was under the $30 million asking price and $12 million more than he paid for it in 2012, according to the Washington Post