Judge in Twitter-Musk lawsuit oversees Tesla payment package case
The judge overseeing Elon Musk’s legal battle with Twitter in the Delaware Chancery Court this fall is also hearing another battle over the Tesla pay package that made him the richest person in the world.
Kathaleen McCormick, the chief judge of the Delaware Chancery Court, is presiding over a separate lawsuit challenging Musk’s $56 billion pay package at Tesla.
Both that lawsuit and Musk’s fight with Twitter over a failed $44 billion acquisition deal are slated for October.
The lawsuit from Tesla shareholder Richard Tornetta alleges that the 10-year stock-based stimulus package that Musk received in 2018 was excessive — in part because Musk, as the company’s largest individual shareholder, was already well incentivized to meet performance goals.
Musk’s bid to buy Twitter and subsequent bid to pull out of the deal could have an impact on the other lawsuit. Tesla stock has been under pressure in recent months, slipping as Musk publicly clashed with Twitter’s board over the number of spam bots in the social media app’s user base.
Kathaleen McCormick is Chief Justice of Delaware Chancery Court.Delaware Court of Chancery Kathaleen McCormick is the first female chancellor in Delaware Chancery Court history.Delaware Court of Chancery
As Reuters noted in April, the shareholder lawsuit alleges, in part, that Musk’s Tesla pay package has not received his full attention. Aside from his back-and-forth negotiations with Twitter, Musk is CEO of space company 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 salary package received shareholder approval in March 2018. Since then, Tesla’s stock has risen more than 1,000%.
Tornetta’s lawsuit alleges that the compensation plan is flawed because it doesn’t require him to devote himself full-time to Tesla’s business. While the deal is valued at $56 billion if all performance targets are met, the total value could rise even higher next to Tesla’s stock price.
A Tesla shareholder challenges Elon Musk’s salary package. via REUTERS Elon Musk tries to pull out of buying Twitter. AFP via Getty Images
“Look at most CEO contracts. The first line reads, “You become a full-time CEO and spend substantially full-time on the business and affairs of the company.” That’s standard,” Greg Varallo, a lawyer for the company involved in the pay package case, told Reuters in April.
Tesla attorneys have noted the company’s rapid share growth since the deal closed and pointed out that the deal was approved by independent directors and shareholders.
The lawsuit over Musk’s Tesla payday will begin on October 24 and will last five days.
Meanwhile, Musk suffered a setback in his impending clash with Twitter after McCormick approved the company’s request for an expedited trial. That process will also begin in October and take place over a five-day period.
Twitter is trying to force Musk to honor his original $44 billion deal to buy the company with the backing of a court order — though it’s unclear the billionaire would actually respect the Chancery Court’s decision if he lost the case .
McCormick’s handling of the Twitter case is considered significant as she is one of the few judges to have ordered a corporate entity to close a deal they were trying to make.