CALIFORNIA, U.S. - Tesla CEO and chairman, Elon Musk is facing a lawsuit by a shareholder over his mammoth $2.62 billion pay package.
Accusing the company’s board of corporate waste, the lawsuit alleged that Musk is neglecting the needs of investors and using the tech company for his personal enrichment.
The lawsuit, which is seeking class action status, further calls for Musk’s multi-billion dollar compensation package to be rescinded and the board of Tesla to be overhauled to better protect investors.
Responding to the lawsuit, Tesla issued a statement saying that the lawsuit “seeks to take the power from our shareholders and instead give it to plaintiffs lawyers. We will respond accordingly."
The electric car company said in March that Musk had received the support of shareholders for a package that Tesla estimated to be worth $2.6 billion and consists of 20.3 million stock options to be granted in 12 installments if he reaches capitalization goals.
According to an estimate released by a Morgan Stanley analyst, the package could be worth up to $70 billion if the company continues to grow quickly.
While the award of the pay package at the time ended all speculation that Musk might be planning to quit, it also faced intense criticism for its unprecedented size.
Richard Tornetta’s complaint was unsealed in Delaware's Court of Chancery and reportedly said, “The new E. Musk compensation plan is so large it dwarfs the pay package of every other public company CEO.”
Documents stated that Tornetta had obtained corporate records from Tesla as permitted under Delaware corporate law.
Meanwhile, Tesla pointed out in its official statement on the lawsuit that Musk gets nothing unless the company's market value doubles and continues to increase until it becomes one of the world's most valuable companies.
The lawsuit was filed at a time when the company is going through a rough patch, failing to produce a quarter of the target of 400,000 Model 3 vehicles.
Further, the company accumulated over $2 billion in debt last year, leading investors to believe that the company will need to raise money if it wants to survive.
Tesla’s market value currently stands at $60 billion and Goldman Sachs recently predicted that the company will need around $10 billion in the next two years to fund its expansion to China and its auto manufacturing plans.