Elon Musk has been in the headlines ever since he purchased the social media giant Twitter. This time, however, the Tesla and Twitter CEO has been sued for $56 billion by one of Tesla’s investors, Richard Tornetta, who also has a thrash metal background as he was once a heavy metal drummer in the early 2000s.
Having nine shares when he sued Elon Musk in 2018, Richard’s lawsuit against Elon Musk is known as a “shareholder derivative lawsuit.”
The lawsuit states that Musk’s pay packet, based on the company’s performance targets, is unfair as they are being set low, enabling the CEO to earn billions of dollars.
Reuters reported that the pay package allows Musk to buy 1% of Tesla’s stock at a deep discount each time performance and financial targets are met. In other cases, Musk won’t get anything. However, as per court papers, Tesla has hit 11 of the 12 targets.
The case will begin its trial on Monday, November 14, 2022, in Wilmington, Delaware.
Meaning of “Shareholder Derivative Lawsuit” explored as Elon Musk sued for $56 billion by a shareholder
The Shareholder Derivative Lawsuit, filed by heavy metal drummer Richard Tornetta, is a legal action filed by one or more shareholders on behalf of the corporation against the corporation’s directors, board members, or other third parties who breach their duties.
The lawsuit is filed in the company’s name to address the harms that can be caused to the company, in this case, Tesla. This is a lawsuit for the harms that may not be addressed by the director or the board of directors themselves.
While individual shareholders have little or no power in the company’s day-to-day management, they do have the power to elect the board of directors. However, this lawsuit generally protects shareholders who feel that the directors and officers in command are harming the company.
The lawsuit redresses wrongdoings like fraud, conflict of interest, waste of corporate assets, accounting wrongdoing, breach of fiduciary duty, or greed by insiders.
Furthermore, the claim of the lawsuit will not personally benefit the shareholder filing the case but will benefit the corporation or the company. Hence, if Tornetta succeeds, Tesla will benefit as Elon Musk will be paying $56 billion via his stock grants.
At the same time, shareholders can only sue the corporation if they have a valid cause of action, allowing them to ask for a reasonable cost paid for litigation. At the same time, these lawsuits can differ from state to state, and in some cases, they can be extremely complicated due to the conflict between the shareholders’ and directors’ opinions.
Tornetta, a stakeholder in Elon Musk’s Tesla, was once a thrash metal drummer with Dawn of Correction. The band was formed in 2005 and released its first album, Dead Hand Control, in 2006. The members split up a year later, resulting in the end of the band and the group.