Judge Orders Tesla To Provide Documents Regarding Elon Musk’s Compensation – fr

Judge Orders Tesla To Provide Documents Regarding Elon Musk’s Compensation – fr

DOVER, Del. – A Delaware judge on Monday ordered attorneys representing Tesla Inc. TSLA,
directors to pass on some communications that CEO Elon Musk could have shared with the company’s top inside lawyers before the board approved a compensation plan in 2018 that could net Musk more than $ 50 billion.

Vice-Chancellor Joseph Slights Jr.’s decision came in response to a motion for contravention filed on behalf of shareholders who accused Musk and Tesla’s board of directors of violating their fiduciary duties to the company and its shareholders, bestowing undue enrichment on Musk and waste. the company’s assets.

While granting complainants access to certain documents that Musk sent or received, Slights denied access to a wider range of other documents which defense lawyers say are also protected by legal privilege. the lawyer.

Slights said documents Musk shared with Tesla General Counsel Todd Maron or Deputy General Counsel Jonathan Chang before the board approved the compensation plan should be provided to the plaintiff shareholders.

The plaintiffs argued that Chang and Maron, who was Musk’s former divorce lawyer, worked to advance Musk’s interests and negotiated on his behalf against the council’s compensation committee.

“Leveraging his control, close personal connections and reputation for revenge, Musk co-opted Maron and Chang to help him structure the plan without committee participation,” the plaintiffs’ attorneys wrote, asking Slights to force the company to hand over documents.

“Musk and his agents gave the committee a full plan,” they added.

Although Slights agreed that communications directly involving Musk should be disclosed, he refused to order defense attorneys to hand over further communications between board members, Chang and Maron, and a firm of outside lawyers.

The judge said there was no reason for him to order the production of documents that might be protected by solicitor-client privilege when the information might be available from other sources. He noted that Musk, Maron, Chang and compensation committee chair Ira Ehrenpreis have yet to be filed in this case.

The plaintiffs argued in their motion to force Tesla to unduly protect hundreds of documents that Maron or Chang shared with the compensation committee and its advisers.

Lawyer Gregory Varallo told Slights on Monday that plaintiffs in the lawsuit, which was filed in 2018, still have no answer to a simple question: “Whose idea was the biggest compensation plan ever?” designed?”

“If you read the disc so far, no one seems to know it,” Varallo said.

“There was quite a bit of sausage making before it was even a nod to the compensation committee,” he added.

Vanessa Lavely, an attorney representing the directors of Tesla, told Slights that the board had followed “a robust process” to develop and approve the compensation plan.

“There has been absolutely no automatic approval here, and the defendants are eagerly awaiting the opportunity to present this case to court,” she said.

In 2019, Slights refused to dismiss the breach of duty complaints against the directors of Musk and Tesla, and a unjust enrichment complaint against Musk.

Under Delaware’s “business judgment” rule, courts generally give great deference to the decision-making of a board of directors, unless there is evidence that the directors have. had conflicts or acted in bad faith. If a claimant is able to overcome the presumption of the business judgment rule, then the board’s action is subjected to a “total fairness” analysis, which shifts the onus on the company to demonstrate that the transaction involved both fair use and fair price.

Slights said that because the plaintiffs had sufficiently argued that Musk was a majority shareholder and had a conflict of interest, the case lent itself to “heightened judicial suspicion.”

Under that plan, Musk is expected to raise billions if the electric car and solar panel maker reaches ambitious market capitalization and operational milestones. For each of the 12 milestones the company reaches, Musk, who already owned more than 20% of Tesla when the plan was approved, would get stock equal to 1% of the shares outstanding at the time of grant.

Each step is to grow Tesla’s market capitalization by $ 50 billion and hit aggressive goals of growing pre-tax income and profit. Musk would fully benefit from the compensation plan, $ 55.8 billion, only if it led Tesla to a market cap of $ 650 billion and unprecedented revenue and profits in a decade.


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