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Tesla CEO Elon Musk Loses $56B Pay Package Over Performance Issues

Tesla CEO Elon Musk Loses $56B Pay Package Over Performance Issues

Tesla CEO Elon Musk Loses $56B Pay Package Over Performance Issues

Tesla CEO Elon Musk Loses $56B Pay Package Over Performance Issues

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  • Musk loses $56B pay in historic case led by drummer Tornetta.
  • Tornetta, with few Tesla shares, emerges as unexpected opponent.
  • Highlights role of individual shareholders in shaping corporate rules.
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Tesla CEO Elon Musk faced a major setback this week as a judge stripped him of his $56 billion pay package, marking one of the largest legal losses in U.S. corporate history. The surprising opponent in this case was an unlikely figure – Richard Tornetta, a former heavy metal drummer and Tesla shareholder who held just nine shares at the time he initiated the lawsuit in 2018.

The case, which gained momentum and finally went to trial in late 2022, ended with the judge ruling in favor of Tornetta. The court declared the massive pay deal unfair not only to him but also to all fellow Tesla shareholders. Tornetta, whose interest in the case seemed more aligned with creating audio gear for car-customizing enthusiasts, has not commented on the verdict, and his attorney declined to provide any statements.

Tornetta’s involvement in the case raised eyebrows, especially considering his modest stake in the company and his online presence focused on creating gadgets for car enthusiasts. Known for light-hearted videos showcasing his creations and even mishaps, such as torching his own eyebrows, Tornetta’s background includes drumming for the now-defunct metal band “Dawn of Correction,” described as delivering “a swift kick to the face with a steel-toed work boot.”

The unexpected outcome prompted speculation on social media about Tornetta’s motivations, political affiliations, and how an investor with minimal holdings could wield such influence. However, Delaware corporate case law has a history of individual investors with small shareholdings shaping corporate regulations.

Legal experts suggest that individuals like Tornetta play a crucial role in policing boardrooms, even though business groups have criticized such cases as potentially abusive litigation. Law firms representing shareholders often work with individuals who file lawsuits, typically taking the cases on contingency, as seen in the Musk case.

While some critics argue that large investment firms should lead such corporate litigation, experts note that fund managers are often reluctant to jeopardize their relationships on Wall Street. Thus, it fell upon Tornetta to take on Musk, ultimately saving Tesla billions of dollars that the CEO would have received through the contested pay package.

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“His name is now etched in the annals of corporate law,” said Eric Talley, a professor of corporate law at Columbia Law School. “My students will be reading Tornetta v Musk for the next 10 years.” The case highlights the significance of individual shareholders in shaping corporate governance and holding powerful figures accountable for their actions.

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