Elon Musk's $56B Tesla compensation voided by judge

https://www.cnbc.com/amp/2024/01/30/tesla-shares-slide-after-judge-voids-elon-musks-56-billion-compensation.html

by firloop • 2 years ago

35 80 2 years ago

cnbc.com

benzible• 2 years ago

previously: https://news.ycombinator.com/item?id=39196390

apapapa• 2 years ago

He wanted to give himself a $56B compensation?

xcv1236• 2 years ago

The shareholders voted to pay him $50B compensation if he achieved specific milestones

https://www.detroitnews.com/story/business/autos/mobility/20...

koolba2• 2 years ago

Which he did so I don’t really see the issue with any of it. He took his entire compensation betting on massive success of the company and it happened.

Whats wrong with that?

leetgirl832• 2 years ago

The guy that sued and just made Elon Musk lose 55 Billion dollars only had:

NINE SHARES OF TESLA STOCK.

adolph• 2 years ago

Would it be any less if the person had eight or more if ten? Standing is standing. Maybe someone should have paid a troll toll before things got out of hand.

spywaregorilla• 2 years ago

It may have felt less if they had 10,000

mise_en_place2• 2 years ago

Really strange that the court gave standing to this case. I guess I’d better start suing Joe Biden in court. He is ineligible to be on my state’s ballot. As an American citizen, I am aggrieved because he has violated his oath of office by refusing to defend the US border. /s

(Before I am tarred and feathered this is purely satire. But equivalent to the legal argument being discussed here)

rtsil2• 2 years ago

If you really believe that you claims are legitimate, you should sue. And if the courts find that you are right, then they will remove him from the ballot. That's how it's supposed to work.

esoterica• 2 years ago

Why are you commenting on a legal issue if your knowledge of the law is so minimal that you don’t even know what the word “standing” means? Of course shareholders have standing to sue on corporate governance issues, even if their case has no merit.

clouddrover8• 2 years ago

What argument are you trying to make? That big guys should steamroll little guys? That might makes right?

That's a grim worldview.

leetgirl832• 2 years ago

Elon had 400 million shares vs this guy's 9 shares (worth $153 in 2018). Can't you see how ridiculous this is?

goshx2• 2 years ago

This is absurd. Elon deserves the package.

batiudrami• 2 years ago

Does anyone truly deserve $50Bn compensation for anything?

Meekro3• 2 years ago

Yes-- if he can generate much more than $50 billion in value for Tesla shareholders, and they give him $50 billion in compensation, that's a fair trade in my book.

xcv1236• 2 years ago

He's not spending $50B on Lambo's and Gucci bags. If he uses it to start a new company that employs thousands of people then he deserves it.

what3ver3• 2 years ago

The judge said "no":

"A Delaware judge on Tuesday voided the $56 billion pay package of Tesla CEO Elon Musk, ruling that the company's board of directors failed to prove "that the compensation plan was fair" or show much evidence that they had even negotiated with him".

And , to be objective :

"Tesla ended Q4 2023 with a net income of $7.9 billion and the full year with $15 billion in profits" , that money is more 3 years of profit, meaning that the company , after that compensation, must wait almost 4 years, if the trend remains that one, to generate profit !

So who can say the judge was unfair ???

Other possible repercussion, Tesla lack of funds for R&D in a sector where the competitors became very aggressive.

karaterobot• 2 years ago

I'd like to hear what makes you think so, when a judge looked at the facts, heard arguments from both sides, and decided otherwise. Do you have additional facts they did not, or are you basing this off your own study of jurisprudence? Or is it just kind of a knee jerk reaction based on reading a headline and having feelings about it, or is it some fourth possibility I haven't considered?

goshx2• 2 years ago

Because I, along other shareholders, voted for the plan, which you can find here:

https://www.sec.gov/Archives/edgar/data/1318605/000119312518...

The reasons for voiding it are absurd. He did the almost impossible and met all milestones of the plan and brought TREMENDOUS value to all the shareholders.

Had he not done it, his shares would not be worth that much.

erupt7893• 2 years ago

Anyone saying this package is unreasonable likely doesn't know that:

- This compensation package was approved, and he would only obtain payout if and only if Tesla reach some considerable aggressive milestones. - This was in 2018 when the company was not doing well relatively. - The shareholders at the time voted 74% in favour of the package.

s1artibartfast4• 2 years ago

The company was worth 50 billion at the time, and the options (worth 2.6 Billion at the time) vested if the company hit a 650 billion valuation, plus revenue milestones.

Shareholders made 550 billion from performance, and Elon made 50 billion.

https://www.cnbc.com/2018/03/21/tesla-shareholders-approve-e...

lolinder• 2 years ago

The judge addresses all of these points and still came to the conclusion that the package was unreasonable.

- This compensation package was approved, and he would only obtain payout if and only if Tesla reach some considerable aggressive milestones.

The judge points out that the package was approved by a committee consisting of close friends of Musk's who testified during the trial that they did not view the compensation negotiation as adversarial. They were not standing in for Tesla's shareholders, they were collaborating with the CEO to set his own compensation package.

- This was in 2018 when the company was not doing well relatively.

The judge argues that this doesn't matter: Musk already had a nearly 22% stake in the company and had every reason to pursue its success. The board didn't need to offer him 6% of the future value of the company to keep him interested.

- The shareholders at the time voted 74% in favour of the package.

The judge found that sharedholders were misled as to the independence of the people who put the package together, which meant that this vote could not be used as evidence of fairness.

A few relevant extracts:

Delaware law allows defendants to shift the burden of proof under the entire fairness standard where the transaction was approved by a fully informed vote of the majority of the minority stockholders. And here, Tesla conditioned the compensation plan on a majority-of-the-minority vote. But the defendants were unable to prove that the stockholder vote was fully informed because the proxy statement inaccurately described key directors as independent and misleadingly omitted details about the process.
The concept of fairness calls for a holistic analysis that takes into consideration two basic issues: process and price. The process leading to the approval of Musk’s compensation plan was deeply flawed. Musk had extensive ties with the persons tasked with negotiating on Tesla’s behalf. He had a 15-year relationship with the compensation committee chair, Ira Ehrenpreis. The other compensation committee member placed on the working group, Antonio Gracias, had business relationships with Musk dating back over 20 years, as well as the sort of personal relationship that had him vacationing with Musk’s family on a regular basis.
At a high level, the “6% for $600 billion” argument has a lot of appeal. But that appeal quickly fades when one remembers that Musk owned 21.9% of Tesla when the board approved his compensation plan. This ownership stake gave him every incentive to push Tesla to levels of transformative growth—Musk stood to gain over $10 billion for every $50 billion in market capitalization increase. Musk had no intention of leaving Tesla, and he made that clear at the outset of the process and throughout this litigation.

s1artibartfast4• 2 years ago

The last part is an interesting argument because I don't understand the limiting principles. It would seem that any anyone who already has a lot of skin in the game can't be incentivized by more skin in the game.

Meekro3• 2 years ago

It's worth noting that companies can change the state that they are incorporated in. Elon is considering changing Tesla to Texas. After he changes, I wonder if Elon's lawyers can get this re-litigated somehow?

https://twitter.com/elonmusk/status/1752491924848820595

aw16211074• 2 years ago

After he changes, I wonder if Elon's lawyers can get this re-litigated somehow?

I'm rather skeptical that such a thing could happen. The events in question all occurred while Tesla was incorporated in Delaware, so I don't think there would be any reason for the laws of Texas to apply. As far as Texas is concerned all the relevant events happened to someone outside of its jurisdiction.

Granted, I'm not a lawyer, let alone one licensed to practice in either Delaware or Texas, so a few grains of salt are more than warranted.

Zigurd• 2 years ago

Legal tricks are seldom workable in real life. In this case evading a shareholder class action by moving to Texas is very unlikely to work. Ask the NRA how much good that did.

ChrisArchitect• 2 years ago

[dupe]

More discussion: https://news.ycombinator.com/item?id=39196390

Elon Musk's $56B Tesla compensation voided by judge

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