Wed. Dec 7th, 2022

After five days of testimony, including three hours of testimony from Elon Musk, a Delaware judge will now decide whether Musk’s $56 billion pay package from Tesla Inc. justified by the company’s explosive growth or undermined by a flawed process.

Musk and the Tesla TSLA.O executives named as defendants have repeatedly testified that the package achieved what it set out to do – a tenfold increase in the company’s stock price, enriching investors and Musk.

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“We thought if we could pull this off, if this plan went through, Tesla would be one of the most valuable technology companies,” Antonio Gracias, a Tesla board member from 2007 to 2021, said Wednesday in a Delaware court. “It was a big deal for shareholders.”

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The trial seeks to resolve shareholder Richard Tornette’s claims that the 2018 pay package was dictated by Musk, the world’s richest person, to junior executives and approved by a shareholder vote rigged by Tesla.

The trial ended Friday as Musk struggles to oversee a chaotic overhaul of Twitter Inc., which he was forced to buy for $44 billion in a separate legal battle before the same judge, Chancellor Kathaleen McCormick.

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“My sense is that even though it all went to trial, the verdict will go in Mr. Musk’s favor,” said Eric Talley, a professor at Columbia Law School who has followed the case.

It will be months before McCormick rules and her decision can be appealed to the Delaware Supreme Court.

During the week-long trial, executives said the pay package was meant to ensure Musk steered the electric vehicle maker through a critical phase when he could have focused on his rocket company SpaceX or tunnel venture The Boring Co.

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Musk told the committee that he wanted a huge package to fund his dream of traveling to Mars, or as he testified, to “make life multiplanetary to ensure the long-term survival of consciousness.”

Musk described his efforts to push the company from the brink of collapse in 2017 to exponential growth. “Words cannot describe the amount of pain,” Musk testified on Wednesday.

Gracias recalled that Musk celebrated his birthday in the factory conference room with a cake from the supermarket. “It was all hands on deck, 24/7, brutal,” he told the court.

The package allows Musk to buy 1% of Tesla stock at a deep discount each time higher performance and financial goals are met. Otherwise, Musk gets nothing.

Tesla achieved 11 of 12 goals as its value briefly rose to more than $1 trillion from $50 billion.

Tornetta wants the plan canceled and the shares awarded under the plan returned to Tesla.

Much of the trial focused on the information given to shareholders before they approved the plan. Tornetta’s lawyers tried to show that Tesla concealed that the package’s three goals were likely to be met quickly.

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The prosecutor portrayed the directors as personal friends or business partners of Musk, who was the link to their wealth.

The executives tried to show they could hold the line against Musk’s demands. But the concession-drawing evidence was limited to the best method for accounting for stock grants and the requirement that Musk must hold his shares for five years.

“It wasn’t a drop-in, drag-out affair,” Todd Maron testified about salary negotiations in 2017 while he was general counsel.

Talley said Musk is a unique CEO and his pay reflects that.

“He’s like a Labrador retriever. He sees the ball and runs after it. You could almost argue that they didn’t pay him enough because he took off after Twitter.”

(Reporting by Tom Hals in Wilmington, Delaware; Editing by Daniel Wallis)