Elon Musk awaits trial after a shareholder filed suit against Tesla and the world's richest man for his 2018 salary package, which multiple sources said was more than $2 billion. Reports have conflicting figures on how much Musk received, with CNBC saying he had received $2.5 billion at the time, while The New York Times put it at $2.3 billion.
Still, after shareholder Richard Torneta claimed in his 2018 lawsuit that Musk's salary package was exorbitant, the company's board of directors violated its fiduciary duty, CNBC reported.
Musk's legal camp has already called for a brief ruling from the court and asked for it to be dismissed. However, Court Chancellor Kathleen St. J. McCormick said in a letter in late February that she doubted the trial could be resolved based on "indisputable facts."
"Therefore, I am canceling the oral argument on the summary judgment proposals," she was quoted by CNBC. "The matter is under trial."
The case stems from Tesla's 10-year performance award for Musk, which seeks to encourage him to lead the company on a long-term basis and help the company reach its goals.
“Elon will receive no guaranteed compensation of any kind – no salary, no cash bonus, and no equity that will vest over time. Instead, Elon’s only compensation will be a 100% risk-on-performance reward , which ensures that it will be compensated only if Tesla and all of our shareholders do exceptionally well," the company said in a proxy statement.
The prize consists of a stock option, which will only be awarded to Musk if Tesla achieves specific milestones.
“In preparing this award, we were mindful of Elon's current stock ownership levels and the conviction that the best outcome for our shareholders is for Elon to continue to lead the company over the long term. This award has been made time after time. Careful analysis with a leading independent compensation consultant as well as discussions with Elon, who with Kimble otherwise distanced himself from the board process,” said the company.
According to the board, linking Musk's compensation to Tesla's performance will ensure that the chief and team are "fully aligned with stockholder interests going forward."
Musk began receiving payouts in 2020 after Tesla shares rose.
However, the said compensation plan was "unfair" and "totally unnecessary," Torneta said in the lawsuit cited by Business Insider, adding that it was "beyond the bounds of reasonable judgment and on any grounds other than bad faith." is unforgivable."
According to the shareholder, Musk already had a large equity stake in the company. As Business Insider reports, he accused Tesla's compensation committee of being "fatally conflicting," adding that the board was also unable to make independent decisions because its members had personal ties to Musk.
CNBC reported that Torneta wants to invalidate the option grant from the 2018 plan, which gave Musk "tens of billions of dollars-worth of stock."