Elon Musk arrived on Twitter making big changes. Among them, he fired the entire board of the company. The executives who left have, together, more than US$ 100 million receivable. But the new owner would have claimed dismissal for just cause for not disbursing that money.
According to Bloomberg, former CEO Parag Agrawal would have around US$ 50 million to receive; former CFO Ned Segal, $37 million; former head of legal department Vijaya Gadde, $17 million. In addition to them, other executives would be entitled to high values.
These compensations are provided for in case of breach of contract for the purchase of the company. They are equivalent to a year’s salary, plus unexercised stock options and a year of health insurance, worth $31,000.
Executives Can Sue Musk (and Win)
Musk, however, seems unwilling to pay those amounts. According to a report by New York Timestwo people with knowledge of the matter say that the new owner fired the executives for just cause, which may invalidate the agreements.
The matter is likely to end up in the courts, and experts believe that Musk is unlikely to win this fight.
On Twitter, the lawyer Dan Goldberg said it is highly unlikely that Musk will be able to convince the judges. “Just cause is typically a very high standard (think criminal conduct, for example),” he says.
The lawyer Tomasz Wlostowski agree. “[Os executivos] will sue. It is very unlikely that they will find just cause in all four cases. There will be a deal, probably for big money.”
Investors and executives have the same mindset. “It’s silly. Marketing ploy. They will sue and [Elon Musk] will lose”, says the investor Villi Iltchev.
“It’s more hostile than silly, and it can be an expensive fight. It is unclear what evidence will be presented if the case ends up in court.” Adam NashCEO of a company in Silicon Valley.
The decision could go beyond financial consequences for Musk. the investor Kyle Cordes believes that this may make it difficult to hire new executives, as they will not trust the stability of the position or the payment of compensation provided for in the contract.
With information: Bloomberg, The New York Times.