An investor from Silicon Valley who sat on Tesla Inc.’s board said that Elon Musk required the highest executive compensation package in US corporate history to keep him “involved.” “in the electric vehicle manufacturer he pioneered.
Ira Ehrenpreis, who took the stand as the first witness in the trial over whether or not Musk should have been paid $55 billion on Monday, testified that Tesla’s board had acknowledged in 2017 that the CEO was a “serial entrepreneur.” “and were concerned about his potential departure to pursue other interests. “We wanted Elon to be at the head of Tesla for a long time,” Professor Ehrenpreis gave testimony.
Btw, I’d like to apologize for Twitter being super slow in many countries. App is doing >1000 poorly batched RPCs just to render a home timeline!
— Elon Musk (@elonmusk) November 13, 2022
Since he recently completed his controversial $44 billion acquisition of Twitter Inc., Musk has plunged the social-media platform into chaos and a threat of bankruptcy with a series of policy, product, and personnel upheavals and an exodus of advertisers, and Ehrenpreis’ testimony sought to establish that it was the board rather than Musk that determined the compensation deal.
At the same time, Elon Musk is scheduled to testify this week in Delaware Chancery Court. An investor has filed suit against Tesla, alleging that the board did not act independently when crafting a new compensation package for its charismatic CEO, Elon Musk. If the shareholder wins the trial, Judge Kathaleen St. J. McCormick could order Musk to repay some or all of the stock awards he received from Tesla.
McCormick presided over a court battle between Musk and Twitter in recent months, during which Musk attempted to renege on the buyout but ultimately agreed to stick to his original terms. According to court documents, Musk said he had “nothing to fear” from the Tesla board’s consideration of his compensation proposal “this is how he described working out the kinks in the compensation plan before trial.
A shareholder’s attorney brought up an email from March 2018 in which Musk threatened to tell an institutional investor they “weren’t welcome” if they voted against the package during a cross-examination of Ehrenpreis “Tesla Motors Inc. According to Ehrenpreis’s testimony, he did not interpret the email as a threat against all large shareholders and he could not understand why Musk was so upset with that particular investment.
As Maron took the stand after Ehrenpreis, no questions were directed at him regarding whether or not Musk had warned the investor personally. According to Ehrenpreis, the board addressed Musk’s pay with 10 of Tesla’s major institutional investors, and they all agreed that it was important to retain Musk on the payroll. Fidelity Investments’ representatives reportedly stated, “We’re all for Elon generating a bunch of money.” “Ehrenpreis recalled the times when Tesla’s valuation spiked.
Musk devotes a great deal of time to his other ventures, including the aerospace company Space Exploration Technologies Corp., the tunneling and neural networking companies Boring Co. and Neuralink Corp., and now Twitter. The bar for lawsuits aimed at CEO remuneration has historically been high, in part because the packages are dependent on lofty share-price expectations. Directors are granted broad latitude to exercise “business judgment” under Delaware law “to determine compensation.
To be sure, the executive compensation package approved for Elon Musk is astronomically large. However, Delaware courts are typically rather deferential “according to Widener University law professor and Delaware corporate law expert Paul Regan, to the compensation decisions of the board of directors when a majority of shareholders vote to support the plan.
A Silicon Valley investor who served on the board of directors for Tesla Inc. claimed that Elon Musk needed the largest executive remuneration package in US corporate history to remain “engaged” in the electric vehicle business he co-founded.
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