OPINION
Dear Friends,
Here’s the New York Post story that marks exactly when things turned sour for Tesla and Elon Musk’s pay package. This is when Kathaleen McCormick, Chancery Court Chancellor, stole the spotlight and began what would become her deciding that Tesla shareholders don’t hold the power in their own company.
We saw it with TransPerfect and defamed former Chancellor Andre Bouchard stealing the spotlight and deciding he knew better than presiding shareholders at that company. Now we’re seeing it again with Tesla and Musk as they will again battle with McCormick over Musk’s pay package.
See the New York Post story below and please send your feedback, folks. It’s always welcome and appreciated.
Respectfully Yours,
JUDSON Bennett–Coastal Network
https://nypost.com/2022/07/20/twitter-musk-lawsuit-judge-overseeing-tesla-pay-package-case
Judge in Elon Musk’s Twitter suit also overseeing $56B Tesla pay package case
By Social Links for Thomas Barrabi
Published July 20, 2022, 10:54 a.m. ET
The judge overseeing Elon Musk’s legal battle with Twitter in Delaware Chancery Court this fall is also handling another fight over the Tesla pay package that helped make him the world’s richest individual.
Kathaleen McCormick, the chief judge of Delaware Chancery Court, is presiding over a separate lawsuit challenging Musk’s $56 billion pay package at Tesla.
Both that trial and Musk’s fight with Twitter over a nixed $44 billion takeover deal are scheduled to take place in October.
Tesla shareholder Richard Tornetta’s lawsuit alleges the 10-year stock-based incentive package that Musk received in 2018 was excessive – in part because Musk, as the company’s largest individual shareholder, was already well incentivized to achieve performance goals.
Musk’s bid to buy Twitter and subsequent effort to back out of the deal could have an impact on the other lawsuit. Tesla shares have been under pressure in recent months, sinking as Musk publicly clashed with Twitter’s board over the number of spam bots in the social media app’s user base.
As Reuters noted in April, the shareholder lawsuit asserts in part that Musk’s Tesla pay package has failed to secure his full attention. Aside from his back-and-forth negotiations with Twitter, Musk is CEO of commercial space firm SpaceX and the founder of The Boring Company and Neuralink.
The stock compensation plan allowed Musk to earn more than 100 stock options in 12 “tranches” tied to Tesla’s performance over a 10-year period. The pay package received shareholder approval in March 2018. Since then, Tesla’s stock has surged more than 1,000%.
Tornetta’s lawsuit asserts the compensation plan is flawed because it does not require him to devote himself full-time to Tesla’s operations. While the deal is valued at $56 billion if all performance goals are met, the total value could rise even higher alongside Tesla’s share price.
“Look at most CEO contracts. The first line, it says ‘you’re going to be a full-time CEO and devote substantially full time to the business and affairs of the company.’ That’s standard,” Greg Varallo, an attorney for the firm involved in the case against the pay package, told Reuters in April.
Tesla attorneys have noted the company’s rapid stock growth since the deal was enacted and pointed out that the agreement was approved by independent directors and stockholders.
The trial over Musk’s Tesla payday is slated to begin on Oct. 24 and last for five days.
Meanwhile, Musk suffered a setback in his looming clash with Twitter after McCormick approved the company’s request for an expedited trial. That trial also will begin in October and take place over a five-day period.
Twitter is seeking to force Musk to follow through on his original $44 billion deal to buy the company with the backing of a court order – though it’s unclear the billionaire would actually honor the Chancery Court’s decision if he lost the case.
McCormick’s handling of the Twitter case is seen as significant since she is one of the few judges on record who has directed a corporate entity to close a deal they tried to exit.