Shulou(Shulou.com)11/24 Report--

On November 15, Tesla director Ella Ellenpris (Ira Ehrenpreis) appeared in court to defend the company's $56 billion compensation package awarded to CEO Elon Musk on Monday, local time. In the case, Mr Musk was accused by shareholders of dominating the terms of the deal to fund his dream of colonizing Mars.

Richard Tornetta, Tesla's shareholder, wants to prove that Mr Musk used his dominance of the electric car maker's board to develop a 2018 compensation package and then deceived investors into approving the plan.

Ellen Price, who has been a director of Tesla since 2007, testified on the first day of a week-long trial in Wilmington, Delaware. He was asked to explain why the board did not require Mr Musk to work for the company full-time in the compensation package. Ellen Price, chairman of the compensation committee, said: "We have never established a simple relationship with Musk to clock in and get paid."

Ellen Price was asked if Musk had told him he wanted to use the salary to fund interstellar travel. "Yes, I know that wish." He replied in court.

Musk himself is scheduled to testify on Wednesday. The court broadcast a video of Musk's 2021 testimony in which he was asked if the board required him to work full-time for Tesla. Musk replied, "No, because it's stupid!" Mr Ellenpris said Mr Musk and the board were focused on achieving their goals rather than the amount of time he spent with Tesla.

Tesla's shareholders worry that Mr Musk was distracted by Twitter, which he bought for $44 billion last month. Musk himself admits that he has too much to do at the moment. He later tweeted that he had been at Twitter's San Francisco headquarters all night. "I will work and sleep here until Twitter is transformed," he wrote. "

Mr Tonetta has asked the court to rescind the pay package awarded to Mr Musk, which is $20 billion higher than Delaware's annual gross domestic product, according to Greg Varallo, his lawyer.

Tesla's other directors were also defendants, but they refuted Tonetta's allegations, arguing that the compensation package ensured that Mr Musk would guide Tesla through a critical period, which helped push Tesla's share price tenfold higher.

The case was ruled by Justice Catherine McCormick of the Delaware Court of Chancery, who previously oversaw the takeover default dispute between Twitter and Musk.

Legal experts say Mr Musk has a better legal position in the compensation case than in the Twitter lawsuit because the board has a lot of freedom to set executive pay. However, if compensation involves controlling shareholders, directors must be subject to stricter legal supervision. The key to the trial is likely to focus on whether the legal provision is appropriate for Mr Musk.

Although Mr Musk owned only 21.9 per cent of Tesla in 2018, the plaintiff may cite his overbearing personality and intimate relationship with several directors as evidence. Lawrence Cunningham (Lawrence Cunningham), a professor of corporate law at George Washington University, said: "No one has ever received a structured dividend plan of this scale with a 21.9 per cent stake and a chief executive."

The pay battle between Disney and a shareholder suggests that the Delaware equity court seems to have more respect for the board's claims in setting compensation. In 1997, a Disney shareholder sued Michael Ovitz, a former president, for $130 million in severance pay, who had worked at Disney for less than two years. The shareholder lost in the 2005 trial, and the Delaware Supreme Court upheld the ruling in 2006.

However, the Disney case involved the dismissal of an executive accused of poor performance, while Tesla thrived under Mr Musk.

The compensation plan allows Mr Musk to buy 1 per cent of Tesla's shares at a steep discount each time he meets escalating performance and financial targets. Mr Musk has met 11 of 12 performance targets as Tesla's market capitalisation briefly soared from $50 billion to more than $1,000bn, according to court documents.

After the trial process is completed, it may take about three months for the judge to make a decision, and both parties can appeal to the Delaware Supreme Court.

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