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Lawsuit against Elon Musk highlights conflict of interest

On Behalf of | Nov 29, 2022 | Business Litigation

Tesla CEO and newly established Twitter CEO Elon Musk is facing shareholder legal challenges regarding a pay package he was granted by Tesla amounting to more than $55 billion.

The plaintiff shareholder maintains that Musk had a significant friendship with other Tesla board members. The plaintiff claims that this bond meant that these board members were likely to follow Musk’s instructions. The plaintiff claims there were conflicts of interest tying personal and professional ties between Musk and board members causing harm to shareholders that led to Musk’s $55 billion pay package.

What is a conflict of interest?

Board members can have a conflict of interest in several ways. For example, directors cannot take advantage of their leadership positions to the detriment of shareholders. They must act in the best interests of shareholders.

Board members also have a duty of loyalty to shareholders. This duty is breached when a board member takes a bribe from a director to vote a certain way or make certain decisions in the director’s favor.

A conflict of interest is a serious legal problem. When a CEO or board member has a conflict of interest, shareholders suffer. This recent shareholder lawsuit against exemplifies how shareholders can pursue legal claims against CEOs and board members who have a conflict of interest that worked to the detriment of shareholders.

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