8 ms·

Tesla shareholders reject bid to strip Musk of chairman role

85 points by gk1 8y ago

arijun 8y ago
So much of the value of the company is tied to Elon Musk's vision. If you think he's going to fail in bringing about that vision, then you should think the correct value of the company is much lower. In which case, you shouldn't have enough of a stake to vote Elon out.
- macintux 8y ago
  There are many good reasons to think that regardless of the person(s) involved, the chairman of the board should have oversight responsibilities over the CEO.
  - pavlov 8y ago
    Yes, in a public company it’s just basic good governance that the CEO and chairman should be separate people, not just separate hats for one unquestioned leader. Case in point: Nokia was enormously successful in the ‘90s with Jorma Ollila as CEO. In 1999 he was also named Chairman of the Board. That is essentially when Nokia started its downward slide of coasting on past successes.
    - bald 8y ago
      > Case in point: Nokia was enormously successful in the ‘90s with Jorma Ollila as CEO. In 1999 he was also named Chairman of the Board. That is essentially when Nokia started its downward slide of coasting on past successes. sample size 1 Correlation != causality
      - pavlov 8y ago
        Thanks for your service, Pointless Statistics Bot. Nokia is an example of a corporation where concentrating power at the highest level led to the undesirable outcome of suppressing criticism and innovation. Ollila has basically admitted as much.
        zxcmx 8y ago
        I think part of the difference in perspective is that many people would say that it didn’t matter who the CEO was; Nokia didn’t have the DNA to do smartphones. In the same way that Motorola didn’t. I think any possible governance issues are really overshadowed by the intrinsic difficulty of dealing with paradigm shift. Expertise in radio, hardware, baseband and all sorts of other great stuff didn’t translate well into phones getting bigger than computers used to be and managing the software complexity that came along with it. They did the old school engineering super well but it wasn’t enough. Yes there’s enormous history there and they did a bunch of things that presaged the modern smartphone but it needed a different kind of company and a different engineering culture to build the things that took over the market. Maybe they could have done it with a visionary type CEO but it would take an extraordinary person to have turned that ship around. In retrospect the iceberg and the flaws in the ship are obvious but Nokia was a very successful company and those are the hardest to change. In any case this is why I would argue that comparing Nokia with Tesla is wrong; Tesla has its flaws but it seems likely that it’s on the right side of the paradigm shift.
      - braythwayt 8y ago
        The expression "case in point," like the expression "exempli gratia," explicitly offers that a certain thing is an example of a phenomenon, not justification for it. Therefore, while it is extremely interesting to ask if concentrating power is a cause or consequence of institutional rot, I don't think we can complain about a sample size of 1 if the argument doesn't say that this one case proves the effect. But yes, it is extremely interesting to ask whether removal of oversight causes rot, or if it is a consequence of rot. In other words, if we randomly appoint certain successful CEOs to chair their own boards, will their companies do worse than a control group that retain separate governance? Hard to conduct that experiment, but it would be interesting. Thanks for the suggestion.
- prebuild_l 8y ago
  There are two things I would like to understand about the 'correct value of the company', both of them related to battery technology: 1. I previously thought that Tesla/SolarCity built their own technologically advanced batteries which would give Tesla cars a competitive advantage. It turns out Tesla run on (something similar to) generic 'laptop batteries'. Do Tesla have some special, secret knowledge about how to build car-sized battery packs from these, or is it a solvable engineering problem for someone else to emulate this? 2. Is there a lot of risk to the battery technology? Is it possible/likely for Tesla to suffer a series of battery fires the way Samsung did? Ultimately, I am trying to understand the residual value of the company if they fail at making and selling cars. If the short thesis is correct, their car doesn't set the world alight, and they run out of money, is there something valuable related to building batteries that other electric car builders will definitely want to salvage from the company? Or is their battery technology something that a group of smart people at BMW or Chrysler could easily replicate?
raverbashing 8y ago
"Tesla minority shareholder launches stillborn bid to take out the chairman of the company" I'm not sure if this attempt is just a pathological need to show off or just some MBAtitis. Activist investors are an annoyance of public companies.
- jakobegger 8y ago
  I don’t understand this. If you don’t want other people to have a say in your company, why would you make it public? If you own shares of a company, you have certain rights, and I don’t see anything wrong with making use of them.
  - yreg 8y ago
    >why would you make it public? $$$
  - kelnos 8y ago
    If making use of those rights ends up being a distraction to the company that hurts it more than leaving well enough alone, then you're only losing money for yourself. Just because a shareholder has decided to exercise shareholder rights, it doesn't mean it's actually a good idea. Sometimes activist investors have the right idea. Often they don't. > * If you don’t want other people to have a say in your company, why would you make it public?* It's a trade-off. You get money in return for greater public transparency and oversight. You don't have to like it to see the need to go for it.
    - walshemj 8y ago
      Not if you have the multiple share classes with wildly different voting rights - though in the UK that will get you kicked out of the FTSE index if you take the piss that way.
- txsh 8y ago
  Investors are owners. They own the company. You're saying the owners of the company are annoying to the people working for the company.
dayaz36 8y ago
>"Tesla CEO Elon Musk has rebuffed a shareholder attempt to overhaul the electric car maker's board and strip him of his role as chairman" Actually, the shareholders rebuffed a shareholder attempt to strip him from chairman role. The article makes it sound like shareholders are in contention with Elon when the opposite is true.
- JumpCrisscross 8y ago
  > shareholders rebuffed a shareholder attempt to strip him from chairman role Do we have a vote breakdown for independent shareholders? Musk owns 22% of Tesla [1]; a majority of shares are held by people who are his family or close personal friends. The measure could have passed with a minority of independent shareholders' support. [1] https://corpgov.law.harvard.edu/2018/04/23/elon-musk-and-the-control-of-tesla/ https://corpgov.law.harvard.edu/2018/04/23/elon-musk-and-the...
  - adventured 8y ago
    > a majority of shares are held by people who are his family or close personal friends Show me the evidence that the majority of Tesla is owned by Musk + his family and or personal friends. Institutional ownership is 61%. They hold ~$30 billion of the company. Firms like Fidelity, T Rowe Price, Baillie Gifford, Vanguard, Blackrock, Bank of Montreal, etc. all control dramatically more than Musk's family and friends. https://www.nasdaq.com/symbol/tsla/institutional-holdings https://www.nasdaq.com/symbol/tsla/institutional-holdings
Consultant32452 8y ago
Tesla has the biggest short position of any stock. Beware astroturfing. https://www.forbes.com/sites/chuckjones/2018/04/15/tesla-has-the-largest-short-position-of-any-stock-followed-by-the-faangs/#4061ba161573 https://www.forbes.com/sites/chuckjones/2018/04/15/tesla-has...
- Cthulhu_ 8y ago
  I'm glad the vote didn't pass; if Musk were to be ousted, Tesla's stock would crash and the company would be dead. Not dissimilar to Apple, except I get the feeling Musk has a much bigger influence on the company than Jobs had at the time he was ousted.
  - agumonkey 8y ago
    publicly maybe but I'm pretty sure internally Musk is way less important than Jobs at Apple
    - jernfrost 8y ago
      Really? What makes you conclude that? Elon Musk is kind of like Steve Jobs and Wozniak molded into one person. Musk has deeper technical knowledge than Jobs ever had while he also has some of Jobs intuition about design and products.
      - busterarm 8y ago
        The cultish adoration of Jobs is strong and they exist in their own reality bubble.
      - agumonkey 8y ago
        Nothing to do with Musk credentials, I just think in the context of car / factories there's a lot of people as knowledgeable as him. Jobs was dealing with a different field, computer tech is a little weirder, and a lot more to do with culture / brand, which Jobs exuded.
    - 8y ago
RyanShook 8y ago
Insightful Reddit comment regarding Tesla’s current financial condition: https://www.reddit.com/r/news/comments/8owkmg/comment/e06xe3v https://www.reddit.com/r/news/comments/8owkmg/comment/e06xe3...
- marvin 8y ago
  There are a lot of subtle errors in that comment. Many points contain part of a truth, and some are outdated or based on speculation. I can’t go through it point-by-point now, but just thought I would point out it might not be as insightful as it seems.
  - RayVR 8y ago
    If you have an actual response you should take the time to write it or not respond at all. Just saying “don’t have time to explain but this is wrong” doesn’t do much good.
    - Brakenshire 8y ago
      Which competent person is going to have time to sit down, research and write out a point by point rebuttal? A 'one way hash' argument?
      - mkirklions 8y ago
        Someone that wants to be listened to.
    - deleted 8y ago
      [deleted]
  - 11thEarlOfMar 8y ago
    One not-so-subtle error: At most they've got 500,000 reservations for Model 3 @ $1,000. That's $500 Million. $500 Million is less than 25% of $2.1 Billion. Another: A German tear-down firm calculated the cost of building a model 3 at $28,000, all-in. So they would make a 20% gross margin on a sale of the base model when it's available. At the moment, you can't buy one for under $46,000. The writer conflates gross margin profit and net profit. As long as the gross margin is healthy, Tesla will have a fighting chance. For example, if they average $10,000 gross margin on those same 500,000 reservations, they make $5B in gross profit $. That's enough to pay back all their debt and finance a large portion of their capital spending. It's all about getting the production line running smoothly, which is why Musk slept on the factory floor for a couple of weeks.
erikb 8y ago
I'm already quite excited about the likely documentary that will follow in a few years. There are just so many elements that one can't see from just reading the news.
eulers__number 8y ago
I hate unions
- sctb 8y ago
  Could you please start commenting substantively? https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
Proven 8y ago
Tesla shareholders are either socialists or thieving (crony) capitalists, so it's only reasonable that they condone of Musk's management style and behavior

85 points by gk1 8y ago

So much of the value of the company is tied to Elon Musk's vision. If you think he's going to fail in bringing about that vision, then you should think the correct value of the company is much lower. In which case, you shouldn't have enough of a stake to vote Elon out.

macintux 8y ago
There are many good reasons to think that regardless of the person(s) involved, the chairman of the board should have oversight responsibilities over the CEO.
- pavlov 8y ago
  Yes, in a public company it’s just basic good governance that the CEO and chairman should be separate people, not just separate hats for one unquestioned leader. Case in point: Nokia was enormously successful in the ‘90s with Jorma Ollila as CEO. In 1999 he was also named Chairman of the Board. That is essentially when Nokia started its downward slide of coasting on past successes.
  - bald 8y ago
    > Case in point: Nokia was enormously successful in the ‘90s with Jorma Ollila as CEO. In 1999 he was also named Chairman of the Board. That is essentially when Nokia started its downward slide of coasting on past successes. sample size 1 Correlation != causality
    - pavlov 8y ago
      Thanks for your service, Pointless Statistics Bot. Nokia is an example of a corporation where concentrating power at the highest level led to the undesirable outcome of suppressing criticism and innovation. Ollila has basically admitted as much.
      - zxcmx 8y ago
        I think part of the difference in perspective is that many people would say that it didn’t matter who the CEO was; Nokia didn’t have the DNA to do smartphones. In the same way that Motorola didn’t. I think any possible governance issues are really overshadowed by the intrinsic difficulty of dealing with paradigm shift. Expertise in radio, hardware, baseband and all sorts of other great stuff didn’t translate well into phones getting bigger than computers used to be and managing the software complexity that came along with it. They did the old school engineering super well but it wasn’t enough. Yes there’s enormous history there and they did a bunch of things that presaged the modern smartphone but it needed a different kind of company and a different engineering culture to build the things that took over the market. Maybe they could have done it with a visionary type CEO but it would take an extraordinary person to have turned that ship around. In retrospect the iceberg and the flaws in the ship are obvious but Nokia was a very successful company and those are the hardest to change. In any case this is why I would argue that comparing Nokia with Tesla is wrong; Tesla has its flaws but it seems likely that it’s on the right side of the paradigm shift.
    - braythwayt 8y ago
      The expression "case in point," like the expression "exempli gratia," explicitly offers that a certain thing is an example of a phenomenon, not justification for it. Therefore, while it is extremely interesting to ask if concentrating power is a cause or consequence of institutional rot, I don't think we can complain about a sample size of 1 if the argument doesn't say that this one case proves the effect. But yes, it is extremely interesting to ask whether removal of oversight causes rot, or if it is a consequence of rot. In other words, if we randomly appoint certain successful CEOs to chair their own boards, will their companies do worse than a control group that retain separate governance? Hard to conduct that experiment, but it would be interesting. Thanks for the suggestion.
prebuild_l 8y ago
There are two things I would like to understand about the 'correct value of the company', both of them related to battery technology: 1. I previously thought that Tesla/SolarCity built their own technologically advanced batteries which would give Tesla cars a competitive advantage. It turns out Tesla run on (something similar to) generic 'laptop batteries'. Do Tesla have some special, secret knowledge about how to build car-sized battery packs from these, or is it a solvable engineering problem for someone else to emulate this? 2. Is there a lot of risk to the battery technology? Is it possible/likely for Tesla to suffer a series of battery fires the way Samsung did? Ultimately, I am trying to understand the residual value of the company if they fail at making and selling cars. If the short thesis is correct, their car doesn't set the world alight, and they run out of money, is there something valuable related to building batteries that other electric car builders will definitely want to salvage from the company? Or is their battery technology something that a group of smart people at BMW or Chrysler could easily replicate?

raverbashing 8y ago

"Tesla minority shareholder launches stillborn bid to take out the chairman of the company" I'm not sure if this attempt is just a pathological need to show off or just some MBAtitis. Activist investors are an annoyance of public companies.

jakobegger 8y ago
I don’t understand this. If you don’t want other people to have a say in your company, why would you make it public? If you own shares of a company, you have certain rights, and I don’t see anything wrong with making use of them.
- yreg 8y ago
  >why would you make it public? $$$
- kelnos 8y ago
  If making use of those rights ends up being a distraction to the company that hurts it more than leaving well enough alone, then you're only losing money for yourself. Just because a shareholder has decided to exercise shareholder rights, it doesn't mean it's actually a good idea. Sometimes activist investors have the right idea. Often they don't. > * If you don’t want other people to have a say in your company, why would you make it public?* It's a trade-off. You get money in return for greater public transparency and oversight. You don't have to like it to see the need to go for it.
  - walshemj 8y ago
    Not if you have the multiple share classes with wildly different voting rights - though in the UK that will get you kicked out of the FTSE index if you take the piss that way.
txsh 8y ago
Investors are owners. They own the company. You're saying the owners of the company are annoying to the people working for the company.

dayaz36 8y ago

>"Tesla CEO Elon Musk has rebuffed a shareholder attempt to overhaul the electric car maker's board and strip him of his role as chairman" Actually, the shareholders rebuffed a shareholder attempt to strip him from chairman role. The article makes it sound like shareholders are in contention with Elon when the opposite is true.

JumpCrisscross 8y ago
> shareholders rebuffed a shareholder attempt to strip him from chairman role Do we have a vote breakdown for independent shareholders? Musk owns 22% of Tesla [1]; a majority of shares are held by people who are his family or close personal friends. The measure could have passed with a minority of independent shareholders' support. [1] https://corpgov.law.harvard.edu/2018/04/23/elon-musk-and-the-control-of-tesla/ https://corpgov.law.harvard.edu/2018/04/23/elon-musk-and-the...
- adventured 8y ago
  > a majority of shares are held by people who are his family or close personal friends Show me the evidence that the majority of Tesla is owned by Musk + his family and or personal friends. Institutional ownership is 61%. They hold ~$30 billion of the company. Firms like Fidelity, T Rowe Price, Baillie Gifford, Vanguard, Blackrock, Bank of Montreal, etc. all control dramatically more than Musk's family and friends. https://www.nasdaq.com/symbol/tsla/institutional-holdings https://www.nasdaq.com/symbol/tsla/institutional-holdings

Consultant32452 8y ago

Tesla has the biggest short position of any stock. Beware astroturfing. https://www.forbes.com/sites/chuckjones/2018/04/15/tesla-has-the-largest-short-position-of-any-stock-followed-by-the-faangs/#4061ba161573 https://www.forbes.com/sites/chuckjones/2018/04/15/tesla-has...

Cthulhu_ 8y ago
I'm glad the vote didn't pass; if Musk were to be ousted, Tesla's stock would crash and the company would be dead. Not dissimilar to Apple, except I get the feeling Musk has a much bigger influence on the company than Jobs had at the time he was ousted.
- agumonkey 8y ago
  publicly maybe but I'm pretty sure internally Musk is way less important than Jobs at Apple
  - jernfrost 8y ago
    Really? What makes you conclude that? Elon Musk is kind of like Steve Jobs and Wozniak molded into one person. Musk has deeper technical knowledge than Jobs ever had while he also has some of Jobs intuition about design and products.
    - busterarm 8y ago
      The cultish adoration of Jobs is strong and they exist in their own reality bubble.
    - agumonkey 8y ago
      Nothing to do with Musk credentials, I just think in the context of car / factories there's a lot of people as knowledgeable as him. Jobs was dealing with a different field, computer tech is a little weirder, and a lot more to do with culture / brand, which Jobs exuded.
  - 8y ago

RyanShook 8y ago

Insightful Reddit comment regarding Tesla’s current financial condition: https://www.reddit.com/r/news/comments/8owkmg/comment/e06xe3v https://www.reddit.com/r/news/comments/8owkmg/comment/e06xe3...

marvin 8y ago
There are a lot of subtle errors in that comment. Many points contain part of a truth, and some are outdated or based on speculation. I can’t go through it point-by-point now, but just thought I would point out it might not be as insightful as it seems.
- RayVR 8y ago
  If you have an actual response you should take the time to write it or not respond at all. Just saying “don’t have time to explain but this is wrong” doesn’t do much good.
  - Brakenshire 8y ago
    Which competent person is going to have time to sit down, research and write out a point by point rebuttal? A 'one way hash' argument?
    - mkirklions 8y ago
      Someone that wants to be listened to.
  - deleted 8y ago
    [deleted]
- 11thEarlOfMar 8y ago
  One not-so-subtle error: At most they've got 500,000 reservations for Model 3 @ $1,000. That's $500 Million. $500 Million is less than 25% of $2.1 Billion. Another: A German tear-down firm calculated the cost of building a model 3 at $28,000, all-in. So they would make a 20% gross margin on a sale of the base model when it's available. At the moment, you can't buy one for under $46,000. The writer conflates gross margin profit and net profit. As long as the gross margin is healthy, Tesla will have a fighting chance. For example, if they average $10,000 gross margin on those same 500,000 reservations, they make $5B in gross profit $. That's enough to pay back all their debt and finance a large portion of their capital spending. It's all about getting the production line running smoothly, which is why Musk slept on the factory floor for a couple of weeks.

erikb 8y ago

I'm already quite excited about the likely documentary that will follow in a few years. There are just so many elements that one can't see from just reading the news.

eulers__number 8y ago

I hate unions

sctb 8y ago
Could you please start commenting substantively? https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

Proven 8y ago

Tesla shareholders are either socialists or thieving (crony) capitalists, so it's only reasonable that they condone of Musk's management style and behavior