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> It was brought by shareholder Richard Tornette, who claimed that "the largest compensation grant in human history" was given to Musk, even though he didn't fo

> It was brought by shareholder Richard Tornette, who claimed that "the largest compensation grant in human history" was given to Musk, even though he didn't focus entirely on Tesla Not understanding how this something related to law? Either he was given the grant legally, or he wasn't. What does it matter how it compares to other people or what percentage of his focus was on Tesla?

wyre 3y ago
It’s related to law because shareholders are sueing Musk and it’s up to the courts to decide if it was granted legally or not.
- deleted 3y ago
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- respondo2134 3y ago
  the question is not if the grant was legal, but if the board issuing options to themselves in this quantity is in the fiducary interest of the shareholders.
dghlsakjg 3y ago
The board of directors has a legal responsibility to govern in the interest of the shareholders. The argument is that the board giving $750mm of shareholder money to themselves is not in the interest of the shareholders for somewhat obvious reasons.
- onlyrealcuzzo 3y ago
  But didn't they agree to do it if Tesla's stock got to some amount? Shouldn't they have written a limit in if they didn't want to exceed a certain amount of compensation?
  - dghlsakjg 3y ago
    No. That's Musk's personal pay package as CEO. This was just stock options that the board gave themselves for their services
- bryanlarsen 3y ago
  They didn't give directors $750mm of shareholder money. They gave about a tenth of that in stock and appreciation did the rest.
  - mikeryan 3y ago
    This is in reference to a different suit. It’s for Elons comp package not the boards comp. Even in regards to the boards comp they were stock options not stock so the compensation is based on the option strike price not just appreciation.
  - dghlsakjg 3y ago
    Issuing stock still costs existing shareholders money in terms of diluted ownership stake
    - zamalek 3y ago
      Further, if the stock is stagnant or declining, this would be taking money from investors via stock dilution. If Jim puts $10 into the company for 10 of 100 total shares, and you increase the shares to 200 by handing out money to executives - Jim now owns $5 (10 of 200 shares) with his other $5 being used to "print" the shares. This is not currently the case with Tesla, but the stock has a reputation for being volatile.
      - dghlsakjg 3y ago
        It’s taking money from investors no matter what the price does. If the price is going up the existing investors now own a smaller percentage of a more valuable company. It’s just more obvious if you get diluted while the company doesn’t change value.
  - harry8 3y ago
    If $735m is not paid to directors, for any reason, however it was generated, however it was calculated, whether options, cash, stock or anything else, no matter what - it belongs to shareholders. It is a transfer of $735m from shareholders to directors that is being reversed and sent back to shareholders, where else could it possibly go? (Well lawyers, but that's another discussion.) Note I'm saying nothing about whether this is good or bad or anything else.
- ajross 3y ago
  > The argument is that the board giving $750mm of shareholder money to themselves is not in the interest of the shareholders for somewhat obvious reasons. I hate business media. FWIW, that number is really badly spun. The grants date back to 2017, when Tesla's market value was 30x lower. So at the time, the grants were more like $20-30M, hardly the kind of hyperbole-inducing sort of thing. They only look huge now because Tesla has been so successful. And thus, more to the point: arguing that you, as a TSLA shareholder, were harmed by the behavior of corporate governance during a period where you made back a three thousand percent return on your investment is... kinda batshit, honestly. Now that said, I don't know anything about the history of shareholder lawsuits or how likely this was to have been successful. It seems like the board capitulated, at least in part. So... no harm no foul, I guess.
  - IanCal 3y ago
    >more to the point: arguing that you, as a TSLA shareholder, were harmed by the behavior of corporate governance during a period where you made back a three thousand percent return on your investment is... kinda batshit, honestly. If it turned out that they'd embezzled a hundred million would you say it's fine because the company still did well?
    - ajross 3y ago
      No, because "embezzlement" is a crime all by itself. It's a kind of theft, and requires deceit. There was no deceit here -- all the evidence was in public the whole time. Fundamentally all they did here was pay themselves. Were they paying themselves too much? Well, yes, in hindsight (at least according to conventional notions of board propriety). But in the context of returns like that? I think the bar for proof of "harm" against the shareholders would be seemingly very high.
      - CPLX 3y ago
        It’s not a tort it’s a breach of fiduciary duty. The argument of harm would come into play if there was no disagreement that the money belonged to the directors, and the directors had harmed the plaintiffs in a quantifiable amount. Then that harm would justify transfer of assets from directors to plaintiff. But that’s not the argument here. The argument is that the funds did not belong to the directors in the first olace and they are being returned to their actual owner. This is based on the theory that all the money involved was the property of shareholders, and any amount of it that ended up in directors pockets has to be explained and justified. There’s no argument of “harm” being made it’s an argument of misappropriation of what isn’t theirs, and specifically that despite having a very clear legal obligation to act only in the interest of shareholders and not themselves the directors did not meet that obligation.
doctoboggan 3y ago
That quote is about a second lawsuit that is still being litigated. The bulk of the story is about the first lawsuit pertaining to payments to the Tesla directors.
deleted 3y ago
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wyre 3y ago

It’s related to law because shareholders are sueing Musk and it’s up to the courts to decide if it was granted legally or not.

deleted 3y ago
[deleted]
respondo2134 3y ago
the question is not if the grant was legal, but if the board issuing options to themselves in this quantity is in the fiducary interest of the shareholders.

dghlsakjg 3y ago

The board of directors has a legal responsibility to govern in the interest of the shareholders. The argument is that the board giving $750mm of shareholder money to themselves is not in the interest of the shareholders for somewhat obvious reasons.

onlyrealcuzzo 3y ago
But didn't they agree to do it if Tesla's stock got to some amount? Shouldn't they have written a limit in if they didn't want to exceed a certain amount of compensation?
- dghlsakjg 3y ago
  No. That's Musk's personal pay package as CEO. This was just stock options that the board gave themselves for their services
bryanlarsen 3y ago
They didn't give directors $750mm of shareholder money. They gave about a tenth of that in stock and appreciation did the rest.
- mikeryan 3y ago
  This is in reference to a different suit. It’s for Elons comp package not the boards comp. Even in regards to the boards comp they were stock options not stock so the compensation is based on the option strike price not just appreciation.
- dghlsakjg 3y ago
  Issuing stock still costs existing shareholders money in terms of diluted ownership stake
  - zamalek 3y ago
    Further, if the stock is stagnant or declining, this would be taking money from investors via stock dilution. If Jim puts $10 into the company for 10 of 100 total shares, and you increase the shares to 200 by handing out money to executives - Jim now owns $5 (10 of 200 shares) with his other $5 being used to "print" the shares. This is not currently the case with Tesla, but the stock has a reputation for being volatile.
    - dghlsakjg 3y ago
      It’s taking money from investors no matter what the price does. If the price is going up the existing investors now own a smaller percentage of a more valuable company. It’s just more obvious if you get diluted while the company doesn’t change value.
- harry8 3y ago
  If $735m is not paid to directors, for any reason, however it was generated, however it was calculated, whether options, cash, stock or anything else, no matter what - it belongs to shareholders. It is a transfer of $735m from shareholders to directors that is being reversed and sent back to shareholders, where else could it possibly go? (Well lawyers, but that's another discussion.) Note I'm saying nothing about whether this is good or bad or anything else.
ajross 3y ago
> The argument is that the board giving $750mm of shareholder money to themselves is not in the interest of the shareholders for somewhat obvious reasons. I hate business media. FWIW, that number is really badly spun. The grants date back to 2017, when Tesla's market value was 30x lower. So at the time, the grants were more like $20-30M, hardly the kind of hyperbole-inducing sort of thing. They only look huge now because Tesla has been so successful. And thus, more to the point: arguing that you, as a TSLA shareholder, were harmed by the behavior of corporate governance during a period where you made back a three thousand percent return on your investment is... kinda batshit, honestly. Now that said, I don't know anything about the history of shareholder lawsuits or how likely this was to have been successful. It seems like the board capitulated, at least in part. So... no harm no foul, I guess.
- IanCal 3y ago
  >more to the point: arguing that you, as a TSLA shareholder, were harmed by the behavior of corporate governance during a period where you made back a three thousand percent return on your investment is... kinda batshit, honestly. If it turned out that they'd embezzled a hundred million would you say it's fine because the company still did well?
  - ajross 3y ago
    No, because "embezzlement" is a crime all by itself. It's a kind of theft, and requires deceit. There was no deceit here -- all the evidence was in public the whole time. Fundamentally all they did here was pay themselves. Were they paying themselves too much? Well, yes, in hindsight (at least according to conventional notions of board propriety). But in the context of returns like that? I think the bar for proof of "harm" against the shareholders would be seemingly very high.
    - CPLX 3y ago
      It’s not a tort it’s a breach of fiduciary duty. The argument of harm would come into play if there was no disagreement that the money belonged to the directors, and the directors had harmed the plaintiffs in a quantifiable amount. Then that harm would justify transfer of assets from directors to plaintiff. But that’s not the argument here. The argument is that the funds did not belong to the directors in the first olace and they are being returned to their actual owner. This is based on the theory that all the money involved was the property of shareholders, and any amount of it that ended up in directors pockets has to be explained and justified. There’s no argument of “harm” being made it’s an argument of misappropriation of what isn’t theirs, and specifically that despite having a very clear legal obligation to act only in the interest of shareholders and not themselves the directors did not meet that obligation.

doctoboggan 3y ago

That quote is about a second lawsuit that is still being litigated. The bulk of the story is about the first lawsuit pertaining to payments to the Tesla directors.

deleted 3y ago

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