Billionaire Tesla, SpaceX and now Twitter CEO Elon Mush is being sued in Delaware’s Chancery Court under Judge Kathleen McCormick for breaching his 2018 pay deal that gives him $50 billion, a fraction of his $210 billion net worth that only gets bigger by the day. Tesla shareholder Richard Tornetta’s farfetched suit seeks to show that Musk works only part-time at his many businesses that includes, Tesla Motors, SpaceX, Twitter, Neuralink, the Boring Co. and OpenAI, an artificial intelligence research company. Tornetta has an uphill battle convincing Judge McCormick that she should breach his 2018 pay deal because Musk, himself, only works part-time. No judge is going to modify a legally binding pay deal because a shareholder wants to argue that Musk is required to work full-time. Musk completed his $44 billion Twitter purchase Oct. 28, after the Twitter board took him to court.
McCormick knows all about Twitter’s board claims that Musk tried to back out of the deal or at least get a discount on the purchase price because Twitter did not disclose all of its fake accounts. McCormick didn’t seem too sympathetic to Musk’s concerns, so he let the deal go through Oct. 28, financing the Twitter purchase largely with Tesla stock. “If Musk loses this pay package in some massive way, I think we can expect to see a lot of things that are going to be really hard to predict, like what happens going forward in terms of how Tesla is run and how Twitter is paid for,” said Ann Lipton, Tulane University Law professor. It’s easy for college professors to opine on issues they know little about. Judge McCormick is not going to mess with Musk’s 2018 pay package because of envious shareholders or jealous law professors. McCormick knows Musk is in a league by himself.
Tonetta has a lot of nerve suing Musk on some spurious grounds that he’s not full-time at any one of his businesses. Musk manages his full-time status by delegating his authority to competent executives to perform essential company functions. When you consider the nearly trillion dollar value of Tesla Motors, Tornetta has a lot of nerve complaining about how much time Musk spends at the company. Tornetta’s lawyers argue to McCormick that Must is a part-time CEO and isn’t entitled to the pay package agreed to 2018. Can you imagine, Tornetta’s attorneys say Musk worked Tuesday, Wednesday but worked at SpaceX Monday and Tuesday? What kind of argument is that for the key man to decide how he should spend his time or whether or not he should be compensated according to Tornetta. Tornetta’s suit should be laughed out of the Chancery Court.
No judge is going to rule against a prior financial contract because a shareholder thinks Musk doesn’t work hard enough. Tesla’s board chair Robin Denholm said Musk’s absence from Tesla was “becoming more and more problematic” in an email written in 2018 to Gabrielle Toledano, Tesla’s Chief People officer. What kind of speculation is that, giving no credibility to Tonetta’s complaint? Must as CEO has a right to delegate his duties to full-time status to any executive of his choice. There’s no provision in any corporate law that has a CEO punching an time-clock, or answering to disgruntled shareholders. Musk’s 2018 pay package allows him to buy 1% of Tesla stock at a steep discount. Tesla Motors under Musk’s watch has met 11 of 12 targets, ballooning market capitalization to over $1 trillion in 2021. Today’s equity sell-off has Tesla Motors market cap at $650 billion.
Tornetta’s argument that Musk’s $50 billion executive pay was based on cherry-picked board members is preposterous. Most companies have boards approved by CEOs with strong ties to the boards. “Who worked for who? Does Elon Musk work for the board or does the board work for Elon Musk,” said Minor Myers, a Uconn Law professor. Obviously, Musk works at the pleasure to the board but tthere’s a symbiotic relationship between the two. Board members understand that Musk in the company’s “key man,” cannot be replace by anyone because of reputation and innovation. McCormick is not going to mess with Musk’s 2018 compensation package because a shareholder questions if he’s worth the pay. Myers said if the board wanted to they could rewrite Musk’s compensation package, something so improbable, so unlikely, it doesn’t deserve discussion.
No judge at Delaware’s Chancery Court is going to buy the arguments of a disgruntled shareholder that watches Musk’s time like a hawk. There’s no provision of any CEO to punch a time clock like rank-and-filed employees. Whatever Musk’s attorneys negotiated in 2018 as a pay package cannot be tampered with because a disgruntled shareholder doesn’t like the arrangement. “He now owns Twitter. How do they want to factor that in?” asked Myers. McCormick is not going to pass judgment on how Musk uses his time for all of his various ventures. McCormick knows that at CEO can delegate responsibilities to competent executives. “How much money do they need to put in front of this guy to get his attention?” asked Myers. Myers know these are not legal arguments but the kind of jealousy and envy that goes with the territory for successful entrepreneurs like Musk.
About the Author
John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He’s editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.
