Elon Musk testified Wednesday that he was not involved in discussions among Tesla board members about a 2018 compensation package that would give him billions of dollars in stock options, making him the richest person in the world.
Speaking in a courtroom in Wilmington, Del., Mr. Musk countered allegations in a stockholder lawsuit that the electric car company’s board was full of friends and other people close to him doing his bidding.
“I was completely focused” on managing Tesla, he said.
The case in which Mr. Musk is testifying revolves around an compensation package that awarded Mr. Musk stock options that gave him the right to acquire nearly $50 billion worth of Tesla stock if the company met certain revenue, profit and share appreciation targets. At the time, the deal was one of the largest of its kind, and it has become a template used by many other boards to reward CEOs.
In court filings, attorneys for the stockholder who brought the case, Richard Tornetta, allege that Mr. Musk in April 2017 began outlining the pay deal with a director, Ira Ehrenpreis, who headed the board’s compensation committee. The prosecution’s lawyers have also said in court filings that Tesla’s directors and executives said in statements that the board did not expect Mr. Musk to leave the company and had not begun identifying potential successors for him.
On the witness stand, Mr. Musk also appeared to refute a claim in the lawsuit that the stock he already owned in Tesla — about 22 percent of the company — was incentive enough. Amid an existential struggle to ramp up production of the company’s first mass-market car, the Model 3, he said he was considering leaving Tesla.
“We were at a turning point where we had to decide whether I would run the company or someone else would run the company,” Musk said. “I didn’t want to be CEO”
Attorneys for Mr. Musk and Tesla’s directors filed a motion to dismiss the lawsuit, but in 2019 another Delaware judge allowed most of the case.
The case is being heard by Chancellor Kathaleen McCormick of the Delaware Court of Chancery. She also presided over the short-lived lawsuit Twitter filed against Musk in July to force him to go through with the acquisition of the social media company after he attempted to back out of the deal. Mr. Musk finalized the deal last month.
More than a year after the 2018 Tesla payment deal came about, the company’s stock began to rise sharply, rising from about $21 to a peak of about $410 in November 2021. Since then, it’s down about 50 percent and it is now trading at around $190.
In addition to defending himself, Musk used his time on the witness stand to broach some of his favorite talking points, including how Tesla single-handedly created the electric car industry and why he hates the Securities and Exchange Commission and investors who betting against Tesla stock prices.
“Tesla has had a huge effect on the world,” Musk said in response to a question from a lawyer representing Tesla, Evan Chesler, who appeared to be intended to show that he had earned his wages. “Not just that Tesla makes electric vehicles, we’ve really been the main reason the rest of the auto industry has moved to sustainable, electric vehicles.”
Under questioning by Gregory Varallo, an attorney representing shareholders who appeared to be designed to show that Mr. Musk did not always heed authority, Mr. Musk lashed out at the SEC. The commission charged him with securities fraud for alleging in August 2018 that he “secured funding” to take Tesla private. To settle that case, Mr. Musk stepped down as chairman of Tesla, paid a fine and agreed to to have an attorney investigate some of his social media posts about Tesla In April, a federal judge denied a request from Mr. Musk to terminate his agreement with the SEC
Mr. Varallo posed a series of questions to show that Mr. Musk is acting with little oversight from Tesla’s board, for example by using the car company’s engineers to help him with Twitter.
“Has anyone ever suggested to you that it might not be a good idea to use the resources of a public company for a private company?” said Mr. Varallo.
Mr. Musk replied that the engineers came voluntarily and did the work on their own time. “It was very short-lived,” he said. “It took a few days and then it was over.”
Mr. Varallo then asked, “Did any of these so-called independent directors call you and say it might not be a good idea?”
“I don’t think I got a call,” replied Mr. Musk.
Mr. Musk spoke quietly in response to some questions and gave one-word answers. On other topics, however, he spoke at length.
At one point, relatively early in his testimony, Chancellor McCormick expressed his frustration with Mr. Musk’s digressions, saying, “I’m going to interrupt Mr. Musk because we could all listen to this all day. It’s very interesting, but I don’t think it answered the question, which I have now forgotten.”
