Musk says he made some Tesla decisions without board approval, defends $55 billion pay plan

WILMINGTON, Del. -- Elon Musk said he was completely focused on Tesla Inc. in 2017 when the electric car maker was in "crisis," in testimony on Wednesday to rebut claims that his $55 billion pay package was based on easy performance targets and approved by a compliant board of directors.

He also acknowledged he made decisions about Tesla, including pausing the acceptance of Bitcoin payments, without board approvals.

Tesla shareholder Richard Tornetta sued Musk and the board in 2018 and hopes to prove that Musk used his dominance over Tesla's board to dictate terms of the package, which did not require him to work at Tesla full-time.

Musk, the world's richest person, in a Delaware courtroom said he had made a unilateral call on ending acceptance of the Bitcoin cryptocurrency for environmental reasons. He also acknowledged that the board was not informed before he told analysts in October that Tesla's board was considering buying back up to $10 billion of stock.

Tornetta's lawyer tried to portray Tesla as a company completely in the grip of Musk, who sought the record pay package with easy targets to help finance his ambitions to travel to Mars.

Musk admitted that he vacationed with board members and sometimes tweeted about the company without clearing the messages with a Tesla lawyer as required by a 2018 settlement with the U.S. Securities and Exchange Commission.

In earlier testimony, he described how the automaker was struggling to survive in 2017, when the pay package was developed.

"I was entirely focused on the execution of the company," Musk said when he was questioned about Tesla by his attorney Evan Chesler, adding that he did not dictate the terms of the pay plan.

He said he would not accept a pay plan that required him to punch a clock or commit certain hours to Tesla. "I pretty much work all the time," he said. "I don’t know what a punch clock would achieve."

The five-day trial before Chancellor Kathaleen McCormick comes as Musk is struggling to oversee a chaotic overhaul of Twitter, the social media platform he was forced to buy for $44 billion in a separate legal battle before the same judge after trying to back out of that deal.

Musk, who arrived in a black Tesla and was led into the courtroom via a separate entrance due to safety concerns, completed his testimony on Wednesday in just under three hours. He was followed on the stand by Antonio Gracias, a Tesla board member from 2007 to 2021.

The billionaire testified that he focuses his attention where it is needed most, which in 2017 was Tesla.

"So in times of crisis, allocation changes to where the crisis is," said Musk.

Musk has a history of combative testimony and often appears disdainful of lawyers who ask probing questions. In past trials, he has called opposing attorneys "reprehensible," questioned their happiness and accused them of "extortion."

Musk was more restrained in Wednesday's proceedings, although he chafed at probing questions.

At one point, Musk told the plaintiff lawyer, "your question is a complex question that is commonly used to mislead people."

Musk acknowledged that he was not a lawyer but added "when you're in enough lawsuits you pick up a few things."

Musk tweeted this week that he was remaining at Twitter's San Francisco headquarters around the clock until he fixed that company's problems, and said on Wednesday he had come on an overnight flight from the social media company.

Tornetta has asked the court to rescind the 2018 package, which his attorney Greg Varallo said was $20 billion larger than the annual gross domestic product of the state of Delaware.

The legal team for Musk and the Tesla directors have cast the pay package as a set of audacious goals that worked by driving 10-fold growth in Tesla's stock value, to more than $600 billion from around $50 billion.

They have argued the plan was developed by independent board members, advised by outside professionals and with input from large shareholders.

The disputed Tesla package allows Musk to buy 1 percent of Tesla's stock at a deep discount each time escalating performance and financial targets are met. Otherwise, Musk gets nothing.

Tesla has hit 11 of the 12 targets, according to court papers.

Shareholders generally cannot challenge executive compensation because courts typically defer to the judgment of directors. The Musk case survived a motion to dismiss because it was determined he might be considered a controlling shareholder, which means stricter rules apply.

"There is no case in which a 21.9 percent shareholder who is also the chief executive has received a structured payout plan of this magnitude," Lawrence Cunningham, a corporate law professor at George Washington University, said of the lack of precedent.