Pension fund sues Elon Musk, Tesla board over ‘unrelenting greed’

By Jef Feeley

(Bloomberg) – Tesla directors, including co-founder Elon Musk, awarded themselves massive compensation packages over a three-year period that improperly siphoned hundreds of millions of dollars out of the electric carmaker’s coffers, a pension fund invested in the company alleges.

The directors – including Oracle founder Larry Ellison, James Murdoch, son of media mogul Rupert Murdoch, and Musk’s brother, Kimbal Musk – wasted corporate assets in granting themselves some of the highest director pay awards among US corporate boards, a pension fund representing Detroit police and firefighters said in a lawsuit filed Wednesday in Delaware.

Tesla’s board members used their positions to “enrich themselves at the company’s expense”, lawyers for the pension fund said in the 78-page complaint. “They have granted themselves millions in excessive compensation and are poised to continue this unrelenting avarice into the indefinite future.”

The fund isn’t the first Tesla investor to take issue with pay and incentives for Musk and other directors.

An individual Tesla investor argued in a 2018 suit that directors should rescind Musk’s multibillion-dollar pay package and the company’s board should be shaken up to better protect the carmakers’ shareholders. That case is set for trial in October of next year in Wilmington, Delaware.

Tesla didn’t immediately respond to an email after regular business hours Wednesday seeking comment on the new suit.

Musk has been a lightning rod over executive compensation ever since he co-founded Tesla in July 2003. In 2018, Tesla shareholders approved a controversial long-term incentive plan that offered the entrepreneur the chance to reap more than $50 billion from stock-option grants if the company increased its market capitalisation to $650bn.

The directors went overboard on compensation starting in 2017 and didn’t stop abusing the system over the next three years, the pension fund alleged.

In 2018, Tesla’s two non-employee directors received stock grants worth more than $8.7m for the year, and the board chairman – Australian telecom executive Robyn Denholm – was the second highest-paid board chair in the US, according to the suit.

Denholm replaced Musk as board chair as part of a settlement the company reached with the US Securities and Exchange Commission over allegations that the billionaire chief executive’s prolific tweeting about the company crossed a line and violated securities laws.

Regulators pounced after Musk tweeted in August 2018 that he had “funding secured” to take Tesla private at $420 a share. That sent the company’s shares up more than 13%. As part of the SEC accord, Musk agreed to have his tweets approved by the company’s lawyers.

The fund wants Delaware Chancery Judge Joseph Slights III – who is handling the other investor case over the Tesla board’s pay as well as a legal challenge to the company’s buyout of solar-panel maker Solar city – to find the board’s compensation awards were excessive and to make the directors pay back the company.

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