I believe the Deleware judge would require an independent compensation committee to do the negotiation which is actually a NASDAQ requirement.
One of the US’s largest companies should do more to demonstrate it is following corporate laws.
The judge says something about this. Voting after judge ruling is irrelevant since breach of fiduciary duty by the board members was the ruling. There is no way to defend the 2018 offer with shareholder voting. It’s only legal to make new offers following the law.
Under this perspective, Mr. Musk already lost a lot. The 2018 offer has a lower tax liability than any offer done from now on. But, it is impossible to turn back time to ensure the 2018 offer is legal.
OK. Now we’re getting somewhere! So you accept that the majority shareholder shouldn’t have influence to vote himself more shares.
Now, let’s say that the whole board is in cahoots with Musk and Musk is in some way or other paying off these board members with preferable allocations to shareholdings in his other companies etc.
Now this biased board now puts forward the pay proposal written by Musk himself without negotiating with him to get a bettter deal or support the interests of the shareholders - so as not to jeopardize their gravy train. They put forward misleading information in the vote to give a huge numbers of shares to Musk and hide information from the shareholders. Now does this seem fair?
Then, just as suggested in your earlier post, the solution would be a new decision by the board, endorsed by the shareholders to give him a new 50 to 100bn and scrap the 2018 plan.
Why do you keep repeating this when you know it is irrelevant in Delaware, the judge ruled twice on this.
There is an old saying “if wishes were horses then beggars would be riding”, however much you wish a two-thirds majority would be successful that is not reality.
Elon would probably not win in other states without him having an independent compensation commission.
Yes, the way forward would be to give him a new pay deal. There are still 2 problems:
- The board has lost so much credibility, it is hard to imagine that any big pay deal would not get challenged
- There’s no legitimate financial reason to give him such a big pay deal any more
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Without a recommendation by a genuinely independent compensation commission it would not be that easy.
Indeed, and they can do this in Texas.
Only issue, the tax liability of the offer made at today’s share prices is higher than the offer made at much lower share prices. The offer would need to be much higher to end in the same net amount after taxes.
As PhilMCR puts it, it’s a lot of money. Don’t be cavalier about it and set the whole thing up to be resistant to nosy judges.
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I do have some sympathy for Musk as he did work to earn the money (you can argue about whether it was too much or not). But he screwed up.
When it comes to the biggest and most controversial pay package in history and let’s face it, if you’re working on something worth billions, you better well do everything by the book and dot all the "i"s and cross all the "t"s. You can half-ass something that’s worth $50, but $50billion? No. You do it properly or pay the price.
While I feel bad for him that he lost a lot of money - well, the tiniest violin sort of bad - after all, how bad can you feel for someone who will not even feel the financial impact of losing 50bn+, I think he unfairly got off scot-free for calling the dive rescuer a ‘pedo’ so may be it is just karma.
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And no independent compensation commission will recommend anything near that much and esp. nothing to replace his previously cancelled pay package.
And as much as Musk would like to throw mud at the judge. It has nothing to do with a nosey judge - this action was taken by a Tesla shareholder.
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Texas requires corporations to have an independent compensation commission as I posted earlier.
If the same minority investor goes to the law in Texas then a judge might conclude Elon was changing states to avoid a fair process, in fact, Elon has made statements confirming this.
As noted above, the value in 2018 was far less, 2.3bln as per the board’s calculation.
Sure, still an awful lot, but nonetheless a far cry from the ex-post valuation.
I forgot to say such lawsuits against director compensation are not unusual and some do succeed despite shareholder approval.
There was a recent case against Facebook that was settled out of court and paid the plaintiffs costs.
It is also not the first director compensation case Tesla lost in Delaware, last year some Tesla non-employee directors had to pay back $735 million.
While the discounted accounting value might have been 2.3billion, the board knew that if all options vested it would be worth around $56bn or more if all tranches vested due to the market cap targets.
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What percentage of the increase in shareholder value is that? What would have happened if the market cap had risen to 200 trillion by the time the arrangement ended?
You simply can not use hindsight. Any objection would have had to be raised in 2018.
And what percentage is justified? That’s a serious question, you can’t argue like you do unless you know the answer. The dilution, as it happened, was roughly 10%, what percentage is the maximum justified?
When the stock first started its meteoric rise during the pandemic, Elon - when asked this very question - commented that it was the kind of money needed to finance interplanetary travel.
You should not forget that the first company he founded after selling PayPal was SpaceX.
He didn’t blow 44b of investor money on Twitter because he likes free speech, it was a means to an end to get rid of an administration clearly hostile to him and his most precious baby: SpaceX.
So your theory is that he would have used the money from Tesla to fund SpaceX? if that’s the case, I see it as a much better use of resources vs. buying an island (google), getting a mistress and having to pay your wife half of your net worth (amazon) or investing billions in failed gadgets (Meta).
But that is not my point. He already has 20% shareholding which should be more than enough to keep him incentivised to ensure the success of Tesla without further awards.
It’s not a judge’s job to decide what is enough for someone to be motivated, this is the job of the board, the compensation committee and the shareholders.
True, which is why the judge didn’t.
Also true. And they completely failed at their job, which is why the company got sued.
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