Billionaires: Elon Musk defends $50bn Tesla salary package

In our fortnightly round-up of the world's super wealthy, FTX co-founder Sam Bankman-Fried tries to fix the cryptocurrency hacking problem and Snap’s Evan Spiegel rubbishes the metaverse

Lawyers for Tesla chief executive Elon Musk have argued in a US court that his pay package is not excessive. Reuters
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Elon Musk

Tesla's decision to give chief executive Elon Musk a pay package that could be worth more than $50 billion was not excessive, given the electric car maker’s stratospheric rise in value over the past decade, his lawyers said in a court filing.

Mr Musk, the world’s richest person, must face a Delaware judge at a trial on November 14 to counter accusations that he steamrollered Tesla directors in 2018 to award him what may turn out to be one of the corporate world’s biggest pay deals ever.

Tesla investor Richard Tornetta says directors let the billionaire entrepreneur craft his own compensation plan because of conflicts of interest that left them beholden to Mr Musk, the company’s biggest shareholder.

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Watch: who is billionaire Elon Musk?

Board members also allegedly hid key information about the process from shareholders before investors approved the pay deal as part of a proxy vote.

The package included more than 100 million Tesla stock options to be doled out over 12 periods, but only if the car company hit certain performance goals, according to court filings.

The company hit those targets and Tesla’s market capitalisation jumped from $53bn to more than $690bn over four years, Mr Musk’s lawyers said last week in a pretrial brief.

“The plan designed and approved by the board was not a typical pay package intended to compensate the ordinary executive for overseeing the day-to-day operations of a mature company,” his lawyers said.

“That is because Musk is not the typical CEO.”

Mr Tornetta’s pretrial brief was filed under seal and his lawyers declined to comment on Mr Musk’s arguments.

The five-day trial will be before Delaware Chancery Court Judge Kathaleen St J McCormick, the same judge who was overseeing Mr Musk’s separate legal fight over his $44bn takeover of Twitter.

He had sought to walk away from that deal but has since said he would complete the acquisition.

According to Mr Musk’s lawyers, he has set himself apart from a traditional chief executive as Tesla’s business grew from a risky start-up to one of the world’s most valuable corporations.

“Musk is intimately involved in all aspects of Tesla’s operations, from its strategic direction to its product design,” according to the filing.

“He has been instrumental in transforming Tesla from a high-end electric sports car manufacturer to far more than just a car company.”

Mr Musk’s ability to juggle numerous responsibilities among his companies hasn’t harmed Tesla’s individual performance, his lawyers said.

Besides Tesla, Mr Musk’s companies include Space X, which launches rockets and communications systems, and the Boring Company, a tunnelling operation.

He’s also co-founder of Neuralink, which seeks to develop implants to connect human brains to computers.

Because of Mr Musk, Mr Tornetta’s Tesla holdings have grown by more than 1,000 per cent since 2018, the chief executive’s lawyers said.

“Trial will establish plaintiff’s claims — based entirely on hindsight bias — are unsupported,” the filing said.

FTX co-founder Sam Bankman-Fried has suggested a maximum bounty of $5 million for white-hat hackers. Bloomberg

Sam Bankman-Fried

Crypto billionaire Sam Bankman-Fried has outlined a framework for limiting the impact of the hacks and exploits plaguing the industry, including capping the maximum bounty for attackers at $5 million.

His intervention comes a few days after a hacker was able to keep $50m of the roughly $100m drained from the Mango decentralised finance application under a deal with the platform after the robbery.

More than $3bn has been looted from the crypto sector this year, which is set to be a record for hacking.

Mr Bankman-Fried, co-founder of digital-asset exchange FTX, proposed in a blog post what he called a “5-5 standard”, where hackers keep either 5 per cent of the amount they have taken from a protocol or $5m, whichever is smaller.

Other key provisos are that customers must be made whole and that the hacker is acting in “good faith” and fully intended to co-operate and return most of the assets.

In crypto, attackers are sometimes viewed as white-hat hackers who seek to expose vulnerabilities in return for a reward rather than to make malicious gains.

“Hacks are extremely destructive to the digital asset ecosystem,” Mr Bankman-Fried wrote, adding his 5-5 approach would have curbed the impact of hacks “more than 98 per cent” but that he is still unsure what the right standard would be.

Data from blockchain specialist Chainalysis show decentralised finance (DeFi) has been the target of most of the exploits and hacks this year.

DeFi protocols offer software-based algorithms that enable cryptocurrency investors to trade, borrow and lend on digital ledgers without using a central intermediary.

The spate of attacks is putting the onus on cryptocurrency players to find solutions, given that DeFi is touted as important for the wider adoption of digital tokens, which are also reeling from this year’s rout in coin prices.

Mr Bankman-Fried’s comments were part of a broad post that addressed issues such as sanctions, tokenisation of stocks and what makes an asset a security.

Snapchat founder Evan Spiegel says people prefer augmented reality rather than the metaverse.  AFP

Evan Spiegel

Billionaire Snap founder Evan Spiegel rubbished the idea that future computing will migrate into a virtual world called the metaverse, arguing most people prefer a lighter touch known as augmented reality.

Augmented reality, which, broadly speaking, superimposes digital information on the real world, lets people harness computing power without forcing them to rely on a single screen, Mr Spiegel said.

Unlike a virtual reality headset, the combination of phones and augmented glasses is “more immersive”.

“The metaverse is ‘living inside of a computer’. The last thing I want to do when I get home from work during a long day is live inside of a computer,” Mr Spiegel told the Wall Street Journal Live conference in Laguna Beach, California.

“There is a clear fork in the road between VR and AR.”

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Later at the same event, Apple's marketing chief Greg Joswiak echoed the sentiment, saying the metaverse was “a word I’ll never use”.

Apple is working on its own combined AR and VR headset, Bloomberg News has reported.

Mr Spiegel and his lieutenants have argued that perspective previously, which diverges in part from the more all-encompassing vision of the metaverse espoused by Meta Platforms founder Mark Zuckerberg.

The debate underscores a broader discussion under way about the future of computing as growth in the smartphone era wanes.

Mukesh Ambani, chairman of Reliance Industries, is planning to list a financial services unit to feed his conglomerate's consumer businesses. Bloomberg

Mukesh Ambani

Mukesh Ambani's Reliance Industries will create a financial services unit to feed its consumer businesses that are contributing an increasing share of profits to the retail-to-refining conglomerate.

It will also restructure the engineering and projects divisions as it sets about carrying out large infrastructure investments, including the setting up of an ambitious 5G network in the country.

Jio Financial Services will be spun off and listed in India, Reliance said in a recent exchange filing.

It will lend to consumers and merchants based on proprietary data analytics and will eventually branch out to insurance, payments, digital broking and asset management.

Every Reliance shareholder will receive one share of the new company for every share held in the parent.

The spin-off will complement Mr Ambani’s consumer businesses, which include India’s largest wireless operator with almost 428 million users and a top retail chain with more than 16,000 stores.

Owning the levers of credit in a nation with more than a billion consumers could also help the tycoon bolster his ambitions to take on Amazon in e-commerce.

Jio Financial “will be a technology-led business, delivering financial products digitally by leveraging the nationwide omnichannel presence of Reliance’s consumer businesses”, Mr Ambani said.

It is “uniquely positioned” to capture opportunities and bring “millions of Indians into formal financial institutions”.

No time line was announced by the company for Jio Financial’s listing. Regulatory licences for the key businesses are in place, according to the filing which followed the flagship’s quarterly earnings.

The group will separate the engineering and infrastructure departments of its unit Reliance Projects and Property Management Services and merge them with the parent company.

Mr Ambani has pledged to invest $75bn in renewables infrastructure, $25bn in setting up 5G services across India and another $9bn in its oil-to-chemical business in the next five years.

Updated: October 31, 2022, 5:00 AM