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The point totally missed here. The logic for share awards initially was to align the interests of shareholders and managers. The problem here is: you have foun

The point totally missed here. The logic for share awards initially was to align the interests of shareholders and managers. The problem here is: you have founders often with supervoting shares, they usually have a huge role in appointing the Board, and they are basically looting everything that isn't nailed down from minority holders. The big change was Musk's package. When that happened, all hell broke loose. It is a crazy situation because he already has a huge share in the upside of TSLA, but now he is taxing minority holders too. If anything, this is going to get worse because the rise of passive investing has left the market with essentially no corporate governance escape valves (and, although it is basically verboten to mention this now, changes in "board hiring policies" are having the same effect...if you know, you know...it is not possible to say this explicitly on the internet). But this is nothing to do with rewarding success or aligning incentives. This is just majority holders who control management and the Board looting non-controlling shareholders. In the cases where this isn't true, for example AAPL, the CEO pay is just wildly out of proportion to the amount of value generated...it is just insane (you are actually seeing tech-oriented PE funds make money from taking public companies private because they are able to gain control over stock-based comp...how crazy is that). Making comp wholly dependent on the share price (as in the Musk deal) is also completely inappropriate because, as a first-year finance student can explain, the stock price is not composed solely of company-specific risk. Just generally, I don't think executives realise this is going to come back to bite them. I am an arch-capitalist but this isn't capitalism, it is feudalism. The economic system in the US is rigged totally. The level of inequality and unfairness that exists in US society has never been sustained by any society. Executives are creating the machine that will end them.

skinnymuch 5y ago
The Musk package doesnt seem that bad. Did any one think the metrics would have actually been met so soon? The ones after the first one he got are even crazier. Yeah stock price as the main or sole focus for rewarding doesn’t make a whole lot of sense.
- hogFeast 5y ago
  The Musk package is financial genocide. The guy owns a ton of shares already, his incentives were totally aligned...think about this way: he owns 17% of the company already so 17% of the package comes from Musk himself, the rest comes from everyone else...that should make clear exactly what is occurring. The economics are totally fucked, he is getting paid 10% of the market cap in a year...when he isn't hitting targets (and the guy is borrowing money like crazy...I think he has borrowed something like $60bn, I don't think anyone has soaked a company this badly...I have certainly never seen anything like this in a company that wasn't fraudulent). It is amazing that no-one has sued the Board (but, again, the problem today is that these investors don't really exist anymore, the largest active investor in TSLA has a 1.5% stake). This is the kind of thing that people will write about in 20 years and be like..."wow, that actually happened, no-one did anything".
  - skinnymuch 5y ago
    I thought he owned over 19% from the get go before any awards. I also read he was getting the equivalent of near 1% of the company’s total stock in the first or second award > he is getting paid 10% of the market cap in a year So is my previous statement incorrect? Where is he getting $60-90B in a year from? Here is a link listing his awards so far: https://observer.com/2020/10/elon-musk-tesla-performance-bonus-payment-history/ https://observer.com/2020/10/elon-musk-tesla-performance-bon... It adds up to a bit under $9B when the market cap was more than 2x lower. We are still talking about around 3% of the market cap. —- If you mean to say he will get 10% if he meets every tranche. I don’t see why that is such a big deal. Tesla’s absurd market cap is where it is because of him. > loans..$69bn Is there any source for this? This seems incredibly insane. A couple billion in loans makes perfect sense. Why would he even want double digit billion dollar loans?
    - hogFeast 5y ago
      No, that is not right. He got paid $20bn last year, and is getting paid more this year. One thing that tends to be confusing for people is that a dollar amount is not being paid, so if you issue shares 100 shares at $100/shares, and the value of the company rises to $200 share then the "value" of the award it not $1k. Giving away shares or paying huge stock-based comp is basically saying that your company is worthless (this is a principle that existed for years before, in tech this has been totally bastardized as employees/managers have looted companies). It is a big deal. It is the biggest comp deal of all-time by tens of billions. As I also explained at great length, it makes no sense because he already had a big position in the stock. The idea that you need to pay someone $20-50bn/year to do a proper job when they are already worth $150bn is...grotesque (I am a big capitalist, I am not in the US but, if I was, I would be a socialist...in Austin, you have people living in tents under almost every bridge, and you have Musk cosplaying as a working man in his $50k house in the same city...whilst he is trying to get rid of his $100m in property elsewhere...it is utterly grotesque, it makes no fucking sense, it isn't a meritocracy, it is feudalism...no-one who is as rich as him has ever demanded share awards like this, no-one, it just doesn't happen because no-one who has this much money is actually that greedy...they can't spend it, so what is the point...it is impossible to look at Musk's actions and not think: "there is something seriously wrong with this person"). Tax avoidance. SpaceX. Other self-aggrandizing nonsense projects. Because TSLA is self-evidently overvalued.

skinnymuch 5y ago

The Musk package doesnt seem that bad. Did any one think the metrics would have actually been met so soon? The ones after the first one he got are even crazier. Yeah stock price as the main or sole focus for rewarding doesn’t make a whole lot of sense.

hogFeast 5y ago
The Musk package is financial genocide. The guy owns a ton of shares already, his incentives were totally aligned...think about this way: he owns 17% of the company already so 17% of the package comes from Musk himself, the rest comes from everyone else...that should make clear exactly what is occurring. The economics are totally fucked, he is getting paid 10% of the market cap in a year...when he isn't hitting targets (and the guy is borrowing money like crazy...I think he has borrowed something like $60bn, I don't think anyone has soaked a company this badly...I have certainly never seen anything like this in a company that wasn't fraudulent). It is amazing that no-one has sued the Board (but, again, the problem today is that these investors don't really exist anymore, the largest active investor in TSLA has a 1.5% stake). This is the kind of thing that people will write about in 20 years and be like..."wow, that actually happened, no-one did anything".
- skinnymuch 5y ago
  I thought he owned over 19% from the get go before any awards. I also read he was getting the equivalent of near 1% of the company’s total stock in the first or second award > he is getting paid 10% of the market cap in a year So is my previous statement incorrect? Where is he getting $60-90B in a year from? Here is a link listing his awards so far: https://observer.com/2020/10/elon-musk-tesla-performance-bonus-payment-history/ https://observer.com/2020/10/elon-musk-tesla-performance-bon... It adds up to a bit under $9B when the market cap was more than 2x lower. We are still talking about around 3% of the market cap. —- If you mean to say he will get 10% if he meets every tranche. I don’t see why that is such a big deal. Tesla’s absurd market cap is where it is because of him. > loans..$69bn Is there any source for this? This seems incredibly insane. A couple billion in loans makes perfect sense. Why would he even want double digit billion dollar loans?
  - hogFeast 5y ago
    No, that is not right. He got paid $20bn last year, and is getting paid more this year. One thing that tends to be confusing for people is that a dollar amount is not being paid, so if you issue shares 100 shares at $100/shares, and the value of the company rises to $200 share then the "value" of the award it not $1k. Giving away shares or paying huge stock-based comp is basically saying that your company is worthless (this is a principle that existed for years before, in tech this has been totally bastardized as employees/managers have looted companies). It is a big deal. It is the biggest comp deal of all-time by tens of billions. As I also explained at great length, it makes no sense because he already had a big position in the stock. The idea that you need to pay someone $20-50bn/year to do a proper job when they are already worth $150bn is...grotesque (I am a big capitalist, I am not in the US but, if I was, I would be a socialist...in Austin, you have people living in tents under almost every bridge, and you have Musk cosplaying as a working man in his $50k house in the same city...whilst he is trying to get rid of his $100m in property elsewhere...it is utterly grotesque, it makes no fucking sense, it isn't a meritocracy, it is feudalism...no-one who is as rich as him has ever demanded share awards like this, no-one, it just doesn't happen because no-one who has this much money is actually that greedy...they can't spend it, so what is the point...it is impossible to look at Musk's actions and not think: "there is something seriously wrong with this person"). Tax avoidance. SpaceX. Other self-aggrandizing nonsense projects. Because TSLA is self-evidently overvalued.