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WILMINGTON, Del (Reuters) – Lawyers for Elon Musk and a Tesla (NASDAQ:TSLA) Inc investor will make closing arguments on Tuesday in a trial over his $56 billion pay package and whether it fueled the electric carmaker’s growth or improperly subsidized Musk’s dream of one day traveling to Mars.
The arguments follow a five-day trial in November that featured testimony from the Tesla chief executive about the origins of the 2018 pay package and whether its performance goals were difficult to achieve and accurately described to investors.
Richard Tornetta, a small Tesla investor, sued Musk and the board in 2018 and hopes to prove Musk coerced compliant directors into providing a package of his design, which is many times larger than the combined pay of the next 200 highest-paid CEOs. It contributes to Musk’s fortune, the world’s second largest.
The package allows Musk to buy 1% of Tesla’s stock at a deep discount each time escalating performance and financial targets are met, otherwise Musk gets nothing.
Tesla has hit 11 of the 12 targets as its value ballooned to briefly top $1 trillion in 2021 from $50 billion when the package was negotiated.
Tornetta’s lawyers argued the Tesla board had a duty to offer a smaller pay package or look for another CEO and they should have required Musk to work full-time at Tesla instead of allowing him to focus on other projects, like running Twitter.
Tornetta wants some or all of the package to be rescinded.
Musk, who founded rocket company SpaceX, admitted during his testimony that his pay package provided funds he would use to finance interplanetary travel.
“It’s a way to get humanity to Mars,” he testified. “So Tesla can assist in potentially achieving that.”
His lawyers also argued the pay plan benefited shareholders by increasing the value of their stock 10 times.
Chancellor Kathaleen McCormick (NYSE:MKC) of Delaware’s Court of Chancery must determine if the Musk, who owned 22% of Tesla stock in 2018, controlled the company through board ties and his personality, which will shape the outcome of the case.
