Highlights of Tesla CEO Elon Musk's court ruling: Mars, Frankenstein, a self-driving car pun


Elon Musk, chief executive officer of Tesla Inc., during a fireside discussion on artificial intelligence risks with Rishi Sunak, UK prime minister, not pictured, in London, UK, on Thursday, Nov. 2, 2023. 

Tolga Akmen | Bloomberg | Getty Images

The bombshell, 200-page Delaware court ruling Tuesday ordering Tesla to undo its massive $56 billion compensation package for CEO Elon Musk features descriptions of a lawyer holding back tears, a reference to “Frankenstein” and a cringey self-driving car pun.

And then there’s a whole section about Mars — the planet — and Musk’s belief that he has “a moral obligation” to use his incredible wealth to help colonize it to help “save humanity.”

That wealth is on track, barring a successful appeal, to be significantly reduced by a ruling issued by Chancery Court Chancellor Kathaleen McCormick.

Musk wasn’t happy about that Tuesday, tweeting, “Never incorporate your company in the state of Delaware.”

But McCormick appeared to have some fun writing her decision.

Here are the highlights of McCormick’s ruling:

  • “Was the richest person in the world overpaid? The stockholder plaintiff in this derivative lawsuit says so. He claims that Tesla, Inc.’s directors breached their fiduciary duties by awarding Elon Musk a performance-based equity-compensation Plan.”
  • “In the final analysis, Musk launched a self-driving process, recalibrating the speed and direction along the way as he saw fit. The process arrived at an unfair price. And through this litigation, the plaintiff requests a recall.”
  • “Musk is motivated by ambitious goals, the loftiest of which is to save humanity. Musk fears that artificial intelligence could either reduce humanity to ‘the equivalent of a house cat’ or wipe out the human race entirely. Musk views space colonization as a means to save humanity from this existential threat. Musk seeks to make life ‘multiplanetary’ by colonizing Mars. Reasonable minds can debate the virtues and consequences of longtermist beliefs like those held by Musk, but they are not on trial. What is relevant here is that Musk genuinely holds those beliefs.”
  • “Colonizing Mars is an expensive endeavor. Musk believes he has a moral obligation to direct his wealth toward that goal, and Musk views his compensation from Tesla as a means of bankrolling that mission. Musk sees working at Tesla as worthy of his time only if that work generates ‘additional economic resources . . . that could . . . be applied to making life multi-planetary.'”
  • “Tesla and Musk are intertwined, almost in a Mary Shelley (‘You are my creator . . .’) sort of way. As Kimbal explained, ‘Tesla created Elon Musk’s persona and Elon Musk’s persona is attached to Tesla.’ Musk is Tesla’s public face, and he describes Tesla as ‘my company.’ (footnote: See generally Mary Shelley, Frankenstein; or, The Modern Prometheus (Lackington, Hughes, Harding, Mavor & Jones, 1st ed. 1818)”

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  • “In addition to his 21.9% equity stake, Musk was the paradigmatic ‘Superstar CEO,’ who held some of the most influential corporate positions (CEO, Chair, and founder), enjoyed thick ties with the directors tasked with negotiating on behalf of Tesla, and dominated the process that led to board approval of his compensation plan. At least as to this transaction, Musk controlled Tesla.”
  • “Musk dictated the timing of the process, making last-minute changes to the timeline or altering substantive terms immediately prior to six out of the ten board or compensation committee meetings during which the plan was discussed.”
  • “The defendants maintained that the plan is an exceptional deal when compared to private equity compensation plans, but they did not explain why anyone would compare a public company’s compensation plan with a private-equity compensation plan.”
  • “The references [from a prior Delaware court ruling] to ‘supine servants’ and ‘an overweening master’ is hyperbolic, and no doubt deliberately so to give emphasis to the difficulty of the standard. But it hits home here. There is no greater evidence of Musk’s status as a transaction-specific controller than the Board’s posture toward Musk during the process that led to the Grant. Put simply, neither the Compensation Committee nor the Board acted in the best interests of the Company when negotiating Musk’s compensation plan. In fact, there is barely any evidence of negotiations at all.”
  • Todd “Maron was totally beholden to Musk, lending credibility to the accuracy of the draft proxy statement. But his relationship with Musk raises concerns as to other aspects of the process during which Maron advised the Board and Compensation Committee. Maron joined Tesla as Deputy General Counsel in September 2013, and was promoted to General Counsel in September 2014, reporting directly to Musk. Before joining Tesla, Maron was Musk’s divorce attorney.”
  • “Maron neither socialized with Musk nor considered himself a friend of Musk when he worked at Tesla, but he owed his career to and had genuine affection for Musk. Both in his deposition and at trial, Maron held back tears when asked about his departure from Tesla in January 2019, describing it as ‘the most difficult decision’ he had made to date.”
  • Defendants also argue that Musk needed additional incentives to stay on at Tesla or he would spend more time at SpaceX, where he could fulfill his galactic ambitions to establish interplanetary travel, colonize Mars, and potentially earn more money in the meantime. That argument begs another question: if encouraging Musk to prioritize Tesla over his other ventures was so important, why not place guardrails on how much time or energy Musk had to put into Tesla?”



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