Elon Musk, whose $55 billion Tesla Inc. pay deal is being challenged in court as too excessive for a part-time chief executive officer, told a judge he is spending almost all his time now reorganizing Twitter Inc. rather than on the other companies he oversees.
Since acquiring Twitter for $44 billion in October, Musk testified Wednesday in Delaware that the lion’s share of his time “for the past few weeks” has been at the social-media platform, though he said the “fundamental organizational restructuring” will be completed by the end of next week.
Delaware Chancery Judge Kathaleen St. J. McCormick is hearing evidence in a trial to determine whether Musk, the world’s richest person, should be forced to return stock-options awarded under the pay package to Tesla, the electric-car maker.
Richard Tornetta — who owns nine shares of Tesla — claims in his lawsuit that the board failed to exercise independence from Musk as it drew up a new pay package for the chief executive officer in 2018. Tornetta said the board lavished the world’s largest compensation plan on a part-time leader.
In addition to Tesla and Twitter, Musk also runs Space Exploration Technologies Corp., an aeronautical start-up; and The Boring Co., a tunneling business; and is involved in OpenAI and Neuralink. Musk agreed with Tornetta’s lawyer that at the time of his pay deal, he was spending about 54% of his time at Tesla, 36% at SpaceX, 10% on Open AI, Boring and Neuralink.
However, Musk said questions about the split between the companies were “silly” because he is focused on taking “a set of actions that are good for” humanity, whether that’s making electric vehicles, using technology to help people with paralysis, or setting up a colony on Mars.
1 Million Tons
The billionaire has said it would take 1 million tons of cargo to build a self-sustaining city on the planet at a cost of as much as $10 trillion. Evidence in the Tesla compensation case shows Musk vowed to use money generated by the 2018 pay plan to fund his dream of a Martian colony.
Tesla directors have defended the pay agreement as not being marred by conflicts. They claim they weren’t influenced by their ties to Musk and said the payout motivated the mercurial billionaire to bring his A-game to spur Tesla’s spectacular growth. The company’s market valuation has jumped from $50 billion to more than $560 billion over the last four years.
Antonio Gracias, a former Tesla director and long-time friend of Musk, testified Wednesday he acted independently in reviewing the 2018 pay plan even though he’d vacationed with the entrepreneur over the years. Gracias said he had a solid relationship with Musk that allowed him to openly share his thoughts on business issues.
“I can say whatever I want” to Musk, Gracias told McCormick after the CEO had finished testifying. “I don’t pull punches with him.” Other evidence presented in the case showed Musk also vacationed with Tesla director James Murdoch, the son of media baron Rupert Murdoch.
According to Gracias, Musk was never required by his compensation plan to spend a certain amount of time at Tesla. “He’s not billing by the hour,” Gracias said. “ That’s not how this works.”
James Murdoch, in testimony Wednesday, joined other board members in praising Musk’s pay package as appropriate because it only kicked in if Tesla hit targets for market value and production that were designed to be difficult to achieve.
Across corporate American, “you see a lot of payment for failure” in executive compensation, Murdoch said. Musk benefitted only after Tesla investors “got much, much more” from the surge in Tesla shares, he said.
During his three hours on the witness stand, Musk claimed he had no role in approving the pay deal, and at the time was focused instead on solving the complex problem of creating a sustainable electric-vehicle company.
“I do not have any understanding of the internal processes by which this compensation structure was obtained,” Musk said, adding that he never discussed his compensation with board members or dictate the terms of the deal.
However, court filings in the case show the entrepreneur was asked in a text by his friend Ira Ehrenpreis, a Tesla board member, on April 8, 2017, about how to structure his future compensation. Musk replied that he should end up “owning 10 percent of the company” in a performance plan built around a progression of targets that would each grant him 1% of Tesla’s outstanding shares, filings show.
As Musk later mused to one of his co-founders in an email, he was “planning on something really crazy, but also high risk.”
The case is Tornetta v. Musk, 2018-0408, Delaware Chancery Court (Wilmington).