On Tuesday, the trial concerning Elon Musk’s $56 billion pay package and whether it fueled Tesla’s growth or subsidised his dream of traveling to Mars will conclude with closing arguments. The five-day trial held in November included testimony from Musk himself regarding the pay package’s origins and its performance goals, which investors believed to be difficult to achieve and accurately described.
Richard Tornetta, a small investor in Tesla, sued Musk and the board over the pay package in 2018. Tornetta aims to prove that Musk coerced compliant directors into providing the package, which is much larger than the combined pay of the next 200 highest-paid CEOs. The package allows Musk to buy 1% of Tesla’s stock at a discounted price each time the company meets financial and performance targets.
As Tesla’s value ballooned to briefly top $1 trillion in 2021 from $50 billion when the package was negotiated, Tesla has hit 11 of the 12 targets. However, Tornetta’s lawyers argued that the board had a duty to offer a smaller pay package or look for another CEO. They should have required Musk to work full-time at Tesla instead of allowing him to focus on other projects, like running Twitter. Tornetta is requesting that some or all of the package be rescinded.
Musk testified that his pay package would provide funds he could use to finance interplanetary travel, which he said would benefit Tesla. His lawyers also argued that the pay plan benefited shareholders by increasing the value of their stock ten times.
The Chancellor Kathaleen McCormick of Delaware’s Court of Chancery must decide whether Musk, who owned 22% of Tesla stock in 2018, controlled the company through board ties and his personality, which will determine the case’s outcome.