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Who is Richard Tornetta, the drummer for heavy metal that Elon Musk would have to pay $56 billion for?

<p>In a remarkable legal upset, Elon Musk, the visionary behind Tesla, encountered one of the most substantial legal setbacks in the annals of US corporate history. A Delaware court annulled Musk’s colossal $56 billion compensation package, a decision orchestrated by an improbable figure: Richard Tornetta, a former percussionist in a heavy metal band holding a modest nine-share stake in Tesla.</p>
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<p>Tornetta’s lawsuit from 2018, perceived as a long shot by many, crescendoed to a landmark verdict this Tuesday. Chancellor Kathaleen McCormick identified the approval process for Musk’s remuneration deal as “profoundly flawed,” orchestrating a shift in the melody of corporate governance. The ruling, essentially obliterating the monumental compensation package, sends shockwaves not only through Musk but across corporate boardrooms nationwide.</p>
<p><strong>Why it matters:</strong> Musk’s remuneration package, sanctioned by Tesla’s board and shareholders in 2018, stood as the largest in corporate history. It aimed to reward Musk for accomplishing ambitious milestones related to the company’s market value, revenue, and profits.</p>
<p>The potential payoff could have bestowed upon Musk more than 20% of Tesla’s stock, valued at approximately $56 billion at current market prices, provided he achieved all outlined goals by 2028.</p>
<p>As per the court’s decree, Musk’s compensation package was unjust to Tesla shareholders, causing dilution of their ownership, granting Musk excessive control, and lacking adequate performance benchmarks. The court found Tesla’s board, inclusive of Musk’s brother and several associates, failed to act independently or in good faith when approving the package. Additionally, Tesla did not sufficiently disclose information to shareholders regarding the potential costs and benefits of the package.</p>
<p>“Swept up by the rhetoric of ‘all upside,’ or perhaps captivated by Musk’s superstar allure, the board never posed the $55.8 billion question: Was the plan even indispensable for Tesla to retain Musk and achieve its objectives?” articulated Kathaleen McCormick of Delaware’s Court of Chancery.</p>
<p>This ruling may entail a substantial reduction in Musk’s fortune, primarily tied to Tesla’s stock price. As of Tuesday, according to the Bloomberg Billionaires Index, Musk’s net worth stood at approximately $204 billion, solidifying his position as one of the wealthiest individuals globally.</p>
<p><strong>The broader perspective:</strong> This case stands as a rare instance of a shareholder successfully contesting a compensation plan in a court of law. It underscores the influence of individual investors, typically possessing limited say in corporate governance, in holding executives and boards accountable.</p>
<p>Tornetta, owning merely nine shares of Tesla when filing the suit, managed to invalidate a compensation deal supported by over 80% of votes cast by Tesla shareholders in 2018.</p>
<p><strong>Drummer’s dual life: Who is Richard Tornetta:</strong> Beyond the legal limelight, Tornetta strikes a contrasting note. Recognized for his heavy metal pursuits at New York’s legendary CBGB club, his life rhythm oscillates between challenging corporate behemoths in court and engaging in lighthearted gadget escapades, including a comical incident involving his eyebrows and a flame.</p>
<p>Tornetta, the shareholder who took on Musk, formerly drummed for a now-defunct metal band called “Dawn of Correction,” characterizing its sound as “a swift kick to the face with a steel-toed work boot.” He also indulges in creating audio gear for car-customizing enthusiasts and shares amusing videos about his gadgets and escapades online.</p>
<p>Tornetta’s legal representative, Stuart Grant, a former corporate-defense lawyer turned advocate for shareholders in suits against executives and boards, deems the ruling a “vindication” for his client and a “wake-up call” for Tesla’s board.</p>
<p>Experts assert that individuals like Tornetta play a crucial role in overseeing boardrooms. Talley, a corporate law professor at Columbia Law School, remarked, “His name is now etched in the annals of corporate law; my students will be studying Tornetta v. Musk for the next decade.”</p>
<p><strong>Public sentiment:</strong> On social media, Tesla and Musk enthusiasts appear to view the case as an injustice, speculating about Tornetta’s motivations and political affiliations. They question how an investor with such nominal holdings could wield such influential authority.</p>
<p>Grant, Tornetta’s lawyer, asserts that the ruling is a “vindication” for his client and a “wake-up call” for Tesla’s board. He expresses hope that the case will establish a precedent for other shareholders to challenge excessive compensation packages in the future.</p>
<p>Musk, who testified for three days during the trial, expressed being “disheartened” by the ruling, denouncing it as “unjust” and “incorrect.” He claims indifference towards the monetary aspect, insisting that he accepted the package solely to motivate himself and his team toward realizing Tesla’s vision. He vows to appeal the decision.</p>
<p>“Never incorporate your company in the state of Delaware,” Musk posted on social media shortly after the ruling. “Change your state of incorporation out of Delaware before they lock the doors,” Musk added.</p>
<p><strong>What lies ahead:</strong> The court mandates Tesla to present a proposal for a new compensation package for Musk within 90 days, subject to the court’s endorsement. It also contemplates compensating Tornetta and other Tesla shareholders who joined the suit, considering the harm caused by the nullified package.</p>
<p>Meanwhile, Musk declared on Thursday that Tesla intends to relocate its state of incorporation from Delaware to Texas, where the company established a new factory and where Musk relocated last year.</p>
<p>However, garnering shareholder approval might pose challenges for Musk, especially if the move is perceived as safeguarding his compensation. Conducting a shareholder vote entails a timeframe of 40 to 60 days, possibly extending if the US Securities and Exchange Commission mandates additional disclosures.</p>
<p>Musk should exercise caution in his wishes, as Texas’ recently established business courts are set to officially open only in September, cautioned University of Nevada law professor Benjamin Edwards. He emphasizes that Texas wouldn’t want a reputation where corporate law becomes a playground favoring billionaires, eroding investor trust.</p>
<p>Furthermore, Delaware remains the preferred state of incorporation for over 65% of Fortune 500 companies and more than half of all publicly traded companies in the US. Its allure lies in a favorable legal framework and tax policies, as emphasized by Harvard Business Services, a company specializing in Delaware business formation. Delaware’s corporate law, known for imposing stringent controls on management and offering enhanced protection for investors compared to states like Nevada, contributes to lower capital-raising costs for Delaware-based companies.</p>

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