Elon Musk Lawsuit: Tesla board chair Robyn Denholm testifies in Delaware

WILMINGTON, Delaware– Tesla’s chief executive said Tuesday in a shareholder lawsuit against a 2018 compensation plan for CEO Elon Musk potentially worth more than $55 billion that she was less concerned about how much time Musk would devote to the company , than about the results he could achieve .

“We didn’t talk about time,” Robyn Denholm said when asked about her conversations with Musk about the compensation plan, which didn’t specify how much time he would devote to the company, unlike his other business ventures.

“He was focused on getting results, not the amount of time he would have to put in,” Denholm said. She added that she doesn’t know how many hours Musk — who took over Twitter last month after paying $44 billion for the social media platform — is devoting to Tesla.

“I’m not worried about the time,” added Denholm, who was a member of the compensation committee for the electric car and solar panel maker that developed the plan. “I know periods when he sleeps on the factory floor.”

The lawsuit alleges that the performance-based stock option grants were negotiated by the Compensation Committee and approved by Tesla board members who had conflicts of interest due to personal and professional ties to Musk, including investments in his companies. It also alleges that the shareholder vote approving the compensation plan was based on a misleading proxy statement.

The lawsuit alleges that the attorney-in-fact misrepresented the members of the Compensation Committee as “independent” and labeled all milestones that triggered the exercise of the stock options as hard-to-achieve “stretch” targets, despite internal projections indicating that three operational milestones expected to be achieved within 18 months of shareholder vote.

Lawyers for the defendants have noted that two proxy institutional advisory firms that urged shareholders to oppose the plan nonetheless noted that it would require “significant and perhaps historic achievements” and growth that “appears to exceed by any benchmark “.

“I thought they were pretty bold at the time,” Denholm said of the milestones.

SEE ALSO: Elon Musk pay package at Tesla challenged in Delaware court

The plan called for Musk to rake in billions if Tesla hit certain market cap and operating milestones. For each simultaneous achievement of a market capitalization milestone and an operational milestone, Musk, who owned approximately 22% of Tesla at the time the plan was approved, would receive shares equal to 1% of the shares outstanding at the grant date. His stake in the company would rise to about 28% if the company’s market cap increased by $600 billion.

Each milestone in the plan includes increasing Tesla’s market cap by $50 billion and meeting aggressive pre-tax revenue and earnings growth targets. Musk would only receive the full benefit of the compensation plan, $55.8 billion, if Tesla reached a $650 billion market cap and unprecedented revenue and profits within a decade.

To date, Tesla has met all 12 market cap milestones and 11 operational milestones, resulting in 11 of the 12 tranches of the grant vesting and giving Musk over $52.4 billion in stock option gains, according to the lawsuit. Since the grant was awarded, Tesla’s market cap has grown from $59 billion to now more than $613 billion, after briefly hitting $1 trillion earlier this year. Musk has sold Tesla shares to fund the Twitter purchase, adding downward pressure on shares.

Shares of Tesla and other automakers have taken a hit this year, but the Austin, Texas-based company made $5.5 billion in 2021, blasting last year’s profit of $721 million. It also produced a record 936,000 vehicles, almost doubling vehicle production in 2020.

The plaintiff’s attorneys have suggested that inciting Musk to stay at the helm of Tesla by offering a huge compensation package is unnecessary, since he never indicated he might leave. They have also hinted that Musk’s real motive in negotiating the package was to fund his dream of colonizing Mars.

Denholm said the main issue isn’t how Musk could spend the proceeds from his option grants, but rather making sure he’s motivated and committed to Tesla’s success.

“Honestly, I don’t know how much it costs to do interplanetary travel,” she said.

In a November 2017 email to former Tesla general counsel Todd Maron, Musk expressed optimism that the compensation package would be viewed in a favorable light.

“Given that this is all being used for purposes that will at least ambitiously maximize the likelihood of a bright future for humanity, and that all Tesla shareholders will be super happy, I think this will be well received,” he wrote adding that “it should come as an ultra-bullish look ahead.”

Copyright © 2022 by The Associated Press. All rights reserved.

https://6abc.com/elon-musk-lawsuit-tesla-ceo-compensation-plan-pay-package/12458247/ Elon Musk Lawsuit: Tesla board chair Robyn Denholm testifies in Delaware

Alley Einstein

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