Elon Musk
Credit: Reuters File Photo
A former Twitter board member, Omid Kordestani, sued the social media company owned by Elon Musk on Friday, claiming that the billionaire refused to cash out more than $20 million worth of shares.
Kordestani, who joined Twitter's board in 2015 and helped oversee the sale of the company to Musk in 2022, received most of his compensation in stock. But after Musk bought the company, now called X, he refused to pay Kordestani for those shares, the lawsuit said.
X "seeks to reap the benefits of Kordestani's seven years of service to Twitter without paying him for it," said the suit, which was filed in California Superior Court in San Francisco.
A representative for X did not immediately respond to a request for comment.
Such a public battle between a former board member and the company he once helped manage is rare -- most boardroom disputes are settled quietly behind the scenes. But Musk's tumultuous acquisition of the social media company for $44 billion upended many notions of normal business practices, and the billionaire has faced a slew of lawsuits over his handling of the deal.
With his lawsuit, Kordestani became the most senior Twitter leader to take legal action against Musk -- but certainly not the first. Twitter's former CEO, chief financial officer, and top lawyers have also sued the company to recoup unpaid compensation, and thousands of employees have joined mass arbitration cases that accuse Musk of wrongfully terminating them and refusing to pay proper severance.
The former top executives have accused Musk of withholding severance payments that they said were automatically owed when he acquired the company. After the takeover, Musk laid off thousands of employees en masse and offered limited severance, which the former employees have argued was less than what they were due under their employment contracts.
The acquisition is also the subject of an inquiry by the Securities and Exchange Commission, which has said that Musk failed to properly disclose purchases he made of Twitter stock as he accumulated a controlling stake in the company before beginning his takeover bid. Last year, the regulator sued Musk to compel his testimony in the matter.
Kordestani was Google's 11th employee, and went on to become its chief business officer, overseeing its transformation into Alphabet, a parent company that owns the search giant, YouTube, and several other companies.
In 2015, Twitter's board asked Kordestani to become its CEO, according to his legal filing. At that time, Jack Dorsey, Twitter's co-founder, was serving as its interim CEO, but the board worried his attention was divided between the social media platform and his payments company, Square.
Kordestani agreed to help manage the company -- but not as CEO. Instead, he took the role of executive chair on the board and mentored Dorsey, who became the permanent CEO. In 2020, after an activist investor tried to force Dorsey out, Kordestani left the executive chair role and assumed a regular board seat.
By the time Musk came calling, Kordestani held 800,000 stock options worth more than $20 million. According to the agreement Musk signed to buy the company, those options should have been paid out within five days of the close of the deal, Kordestani's complaint said. The former board member had also received additional stock payouts that were scheduled for the months following the acquisition, worth nearly $3 million. Musk's purchase agreement stipulated that stock would also be paid out, but it was not, the lawsuit said.
X "now refuses to meet those obligations, adding to a long list of unpaid bills accruing under Mr. Musk's watch," the lawsuit said.