Testimony began Monday in a Delaware courtroom where a Tesla shareholder challenged a compensation plan worth more than $55 billion for CEO Elon Musk based on performance-based stock options. The lawsuit alleges the compensation was negotiated by the committee. And approved by the Tesla board in 2018. Members who had a conflict of interest due to personal and business relationships with Musk.
The lawsuit, filed in 2018, also alleges that shareholders voted to accept that compensation was based on incomplete and misleading proxy statements, specifically the plaintiff’s allegation that the proxy independently compensated all milestones. Described and portrayed as vested stock options for committee members, making it difficult to achieve stretch targets despite internal projections indicated that three operational milestones were likely to occur achieved within 18 months of shareholder vote.
Any action by stockholders based on a materially misleading proxy is void and the grant fails, according to a brief provided by plaintiffs’ attorneys to defendants in their pretrial brief. Two institutional proxy advisors noted that the plan would require significant and perhaps historical achievements and developments that are being pulled off by any benchmark.
The first witness to testify was Ira Ehrenparis a prominent venture capitalist and longtime friend of Musk who chaired Tesla’s compensation committee when the grant was prepared. Under the plan, Musk stood to make billions if the electric car and solar panel maker reached certain market capitalization and operational milestones. For each occurrence of market cap milestones and operational milestones, Musk, who already owned about 22% of Tesla when the plan was approved, will stockpile the equivalent of 1% of the outstanding shares at the time of the grant. will be available.
If the company’s market capitalization rises to $600 billion, their interest in the company will increase by about 28%. Each milestone in the plan will increase Tesla’s market capitalization by $50 billion and aggressively increase revenue or pre-tax profit. Expected to generate Growth target expected to be met Stands to take full advantage. In the pay plan, $55.8 billion only if Tesla hits a market capitalization of $650 billion and unprecedented revenue and earnings within a decade.
According to the lawsuit, to date Tesla has achieved all 12 market capitalization milestones and 11 operating milestones resulting in vesting of 11 of the 12 grant installments and more than $52.4B in stock option benefits. More musk is provided. Since the grant, Tesla’s market capitalization has grown from $59 billion to more than $690 billion, reaching $1 trillion earlier this year.
Shares of Tesla Inc., like all automakers, have suffered this year due to a mix of back-up supply chains and rising inflation. % has declined. The Austin, Texas-based company is looking to make $5.5 billion in 2021 based on last year’s profit of $721 million. It also produced a record 936,000 vehicles, which is more than the number of vehicles the company took off the assembly line in 2020 is almost double.
Ehrenparis testified that much of Tesla’s success is the result of the leadership of Musk, whom he said has a bold vision with a frantic focus on execution but works as hard as a CEO. Ehrenpreis said under interrogation Ehrenpreis, on behalf of defense attorney Evan Chesler, described a nearly year-long process in which he and other directors worked together with the assistance of legal counsel and independent advisors, as well as input from major institutional investors.
According to the minutes of the 2017 meeting of the compensation committee, Ehrenparis described the milestones in the plans as “extraordinarily ambitious and difficult” that prompted Musk to increase targets to avoid disruptive factors created by impractical, unrealistic or unattainable goals.
Ehrenparis also testified that while his friendship with Musk played no role in his vote to approve the plan, he felt it was very important to ensure Elon’s leadership in the next chapter of the company’s life. It was the kind of ambitious plan that propelled Musk and built one of the world’s most valuable companies.
Tesla’s former general manager Todd Maron also testified Monday that Musk never set out the terms of the plan, that the process was cooperative and collaborative and not a knock-down drag-out affair. said no to Maran in his cross-examination, prompting plaintiffs’ attorney Jaron van Quavegen to question whether the compensation plan needed to be upheld.