Tesla CEO Elon Musk’s move to found artificial intelligence company xAI triggered strong dissatisfaction among shareholders. Recently, Tesla shareholders filed a lawsuit against Musk and board members, accusing them of violating their fiduciary duties to shareholders by transferring Tesla's talents and resources to xAI, and demanding that Musk hand over his shares in xAI. This lawsuit is the most direct challenge to Musk’s decision to start xAI so far, and it also highlights Musk’s disputes over the balance between business behavior and company interests.
Tesla shareholders are suing CEO Elon Musk and members of the automaker's board, alleging that Musk decided to start xAI, an artificial intelligence company seen as a rival, and divert Tesla's talent and Resources are transferred to the new startup. The lawsuit becomes one of the most direct challenges to Musk's decision to start xAI.
The lawsuit was filed hours before Tesla's annual shareholder meeting. Shareholders are likely to revisit the $56 billion compensation package that was rejected by a judge earlier this year at the meeting. Musk has always claimed that Tesla is not just an electric car manufacturer, but also an artificial intelligence company. This is one of the reasons why Tesla's stock price and market value remain high.
Cleveland Baker and Teamsters Retirement Fund, Daniel Hasson and Michael Giampietro, representing Tesla shareholders, filed a new lawsuit in Delaware Chancery Court alleging that Musk and Tesla board members violated shareholder obligations. of fiduciary duties and improperly enriched Musk by allowing him to start competing companies.
The plaintiffs also say that Musk violated Tesla's code of business ethics by creating and leading xAI, while the board allowed him to continue violating the code without hindrance. They asked the court to force Musk to surrender his shares in xAI and transfer them to Tesla.
“The idea that the CEO of a large publicly traded Delaware company would launch a competing company with the express approval of the board of directors and then transfer talent and resources from his company to the startup is absurd,” the lawsuit states. ” The indictment compares Musk’s actions to a hypothetical situation in which Coca-Cola’s CEO founded a rival soft drink company and shipped ingredients to it.
Musk launched xAI in 2023 and has attracted $6 billion in funding for the startup, which aims to compete with rivals such as OpenAI, Microsoft and Alphabet. Soon after, Tesla began transferring talent and resources from Tesla to xAI, the plaintiffs note. At least 11 employees joined xAI directly from Tesla, noting that Tesla has been providing xAI with access to AI-related data.
The plaintiffs also allege that Musk transferred a large number of Nvidia AI processors originally reserved for Tesla to his social media company X (formerly Twitter). A few weeks ago, Musk posted on leader". Musk acknowledged moving the chips to the X and claimed Tesla's new data center in Texas was still under construction and had no space to store the chips.
The plaintiffs wrote: “The board allowed Musk — Tesla’s CEO and largest shareholder — to found and lead another artificial intelligence company; to plunder Tesla’s resources and transfer them to xAI; and to Companies outside the U.S. create billions of dollars in AI-related value. Tesla’s board has long been obedient to Musk, and in the face of Musk’s blatant disloyalty, the Tesla board has not even attempted to fulfill its steadfast fiduciary duties. The responsibility is to protect the interests of Tesla and its shareholders.”
Earlier this week, other Tesla shareholders filed a separate lawsuit against Musk, claiming that Musk used inside information to make billions of dollars selling shares in the automaker in 2021 and 2022.
The outcome of this lawsuit will have far-reaching consequences for Musk, Tesla and the entire technology industry, and it will become an important case for future business leaders when dealing with potential conflicts of interest. The trial process of this case deserves continued attention.