A former board member of Twitter, Omid Kordestani, has initiated legal action against Elon Musk's social media platform, now known as X, seeking over USD 20 million in unpaid stock compensation. The lawsuit was filed on Friday in California's Superior Court in San Francisco. It alleges that Musk has refused to cash out Kordestani’s shares following his acquisition of the company in 2022.
Kordestani, who became a board member in 2015 and played a key role in facilitating the sale of Twitter to Musk, claims that the majority of his earnings were in the form of stock options. However, after Musk's takeover, he allegedly did not fulfil his obligation to compensate Kordestani for these shares, according to the complaint. The lawsuit states that X is attempting to benefit from Kordestani’s seven years of service without providing the appropriate remuneration.
Public disputes between former board members and the companies they once governed are uncommon, as such matters are typically resolved discreetly. However, Musk's controversial USD 44 billion acquisition of Twitter has disrupted traditional business practices, leading to multiple lawsuits related to his management of the deal.
With this lawsuit, Kordestani becomes the highest-ranking former Twitter executive to take legal action against Musk, although he is not the first. Former executives, including the company's previous CEO and CFO, have also filed lawsuits to recover unpaid compensation. Additionally, numerous employees have engaged in collective arbitration, alleging wrongful termination and inadequate severance payments.
Former executives have accused Musk of withholding severance that they claim was automatically due upon his acquisition of the company. Following the takeover, Musk executed mass layoffs, offering limited severance packages that former employees argue fell short of their contractual entitlements.
The acquisition is currently under investigation by the Securities and Exchange Commission (SEC), which has raised concerns that Musk did not adequately disclose his stock purchases while amassing a controlling interest in Twitter prior to his takeover bid. Last year, the SEC filed a lawsuit against Musk to compel his testimony regarding this issue.
Kordestani, who was the 11th employee at Google and later became its chief business officer, was invited to assume the CEO position at Twitter in 2015. At that time, Jack Dorsey, Twitter's co-founder, was serving as interim CEO, but the board was apprehensive about Dorsey's divided focus between Twitter and his payment company, Square. Kordestani opted to take on the role of executive chairman instead, mentoring Dorsey, who eventually became the permanent CEO. Kordestani stepped down from the executive chairman position in 2020, transitioning to a regular board member role.
At the time of Musk's acquisition, Kordestani possessed 8,00,000 stock options valued at over USD 20 million. The purchase agreement stipulated that these options should have been compensated within five days of the deal's closure. Additionally, Kordestani was entitled to further stock payouts worth nearly USD 3 million, which were also not disbursed, according to the lawsuit. The complaint asserts that X is now neglecting its financial obligations, contributing to a growing list of unpaid liabilities under Musk's management.
