Elon Musk's lawyers are making closing arguments in a trial over his $56 billion pay package that could be decided as soon as today

Advertisement
Elon Musk's lawyers are making closing arguments in a trial over his $56 billion pay package that could be decided as soon as today
Elon Musk speaks during the official opening of the new Tesla electric car manufacturing plant in Germany on March 22, 2022.Getty Images Europe
  • A judge will hear the closing arguments in a trial over Elon Musk's $56 billion pay plan on Tuesday.
  • A Tesla shareholder has sued Musk and the automaker with the goal of getting the pay plan rescinded.
Advertisement

A Delaware judge will hear closing arguments on Tuesday in the trial over Elon Musk's Tesla compensation package, which is currently valued at about $56 billion and known as the largest compensation package in history.

Lawyers for Musk and Tesla investor Richard Tornetta will begin presenting their final arguments on Tuesday at 1:30 p.m. ET, several months after the trial first kicked off in November. At the time, the five-day trial included testimonies from Musk, as well as several executives that worked at Tesla in 2018, advisors that helped create the pay package, and compensation experts.

Tornetta, the "Dawn of Correction" heavy metal drummer and a Tesla shareholder, sued Tesla and Musk after the compensation plan was instituted in 2018. The case was sent to trial earlier this year.

Complimentary Tech Event
Transform talent with learning that works
Capability development is critical for businesses who want to push the envelope of innovation.Discover how business leaders are strategizing around building talent capabilities and empowering employee transformation.Know More

In the lawsuit, Tornetta argues that Musk and the automaker breached their fiduciary duties by awarding Musk a pay package that was "beyond the bounds of reasonable judgment." The shareholder also argued in the initial lawsuit that it was a conflict-of-interest that Musk was able to design his own pay package, alleging the funds have enabled Musk to focus on other companies without requiring the Tesla CEO to work at the electric-car maker fulltime.

Meanwhile, Tesla has argued that the package was justified because no one else could have made the electric-car maker's value soar the way that Musk has. The company also argued that the pay was necessary to maintain Musk's focus on Tesla and that shareholders like Tornetta have benefitted from Musk's leadership which has sent Tesla's stock prices higher.

Advertisement

"He has been instrumental in transforming Tesla from a high-end electric sports car manufacturer to far more than just a car company," Tesla said in a pretrial filing. "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. Tesla has accomplished 11 of the 12 targets as of 2021 when the carmaker's value temporarily hit $1 trillion. When each milestone is passed, Musk gets stock equal to 1% of outstanding shares at the time of the grant.

Musk — the second-richest man in the world — was worth about $187 billion on Tuesday, per the Bloomberg Billionaire Index. The majority of this wealth is the result of his equity in Tesla.

The judge overseeing the case, Chancellor Kathaleen St. J. McCormick, could come to a decision on the matter as soon as Tuesday. She must determine whether Musk controlled the board's approval of the compensation plan. Tornetta aims to get the pay package rescinded.

The result of the trial could impact not only Musk's pay package, but his other companies as well, Anat Alon-Beck, assistant professor of law at Case Western Reserve University, previously told Insider.

Advertisement

Alon-Beck also noted the trial will hinge on whether Tesla can prove the company's board was properly informed and followed "paper and process" when approving the compensation plan.

Musk is in a much better legal position in the compensation trial then he was in his previous battle with Twitter, multiple legal experts told Insider.

{{}}