16 ms·

The arguments used here are weird. The decision says that Musk was close friends with many members of the board so he effectively controlled it. That's the case

by epups 3y ago

The arguments used here are weird. The decision says that Musk was close friends with many members of the board so he effectively controlled it. That's the case for many, if not most public companies. The other argument was that the board didn't meaningfully push back on the proposed remuneration scheme. Yet, it amounted to a huge gamble - multiplying the value of a 50B company by over 10x -, which in case of success the board agreed to reward with 6% of shares. It sounds silly to me to suggest the board failed their duty when shareholders - including them - had record profits even discounting Musk's reward.

TheLoafOfBread 3y ago
> The decision says that Musk was close friends with many members of the board so he effectively controlled it. That's the case for many, if not most public companies. In Eastern Europe we were calling this tunneling of a company - create a tunnel with help from inside to get riches out and leave the shell to its own demise.
- clipsy 3y ago
  > In Eastern Europe we were calling this tunneling of a company - create a tunnel with help from inside to get riches out and leave the shell to its own demise. Elon prefers to call it “boring.”
- Taek 3y ago
  Increasing the share price by 10x and turning the Model 3 into the worlds best selling vehicle is hardly "leaving the shell to its own demise" *edit: Model Y
  - NERD_ALERT 3y ago
    The Model 3 is not even close to the “best selling vehicle of all time” by any metric.
    - Taek 3y ago
      https://thedriven.io/2023/05/26/tesla-model-y-overtakes-corolla-to-be-worlds-best-selling-car-in-2023/ https://thedriven.io/2023/05/26/tesla-model-y-overtakes-coro... I guess it was the Model Y!
      - josefx 3y ago
        Best selling car over a cherry picked time span is quite far from "best selling car of all time".
  - TheAlchemist 3y ago
    I think we should wait 1-3 years to judge. If Tesla doesn't live up to the hype it created - and I believe there is virtually 0% chance it does - and the stock inevitably crashes - say 90% from here, will your judgement be the same ?
    - kortilla 3y ago
      Yes, he delivered a 10x return to those shareholders that approved. If they choose to stay invested now and lose money, that’s all on them. They know everything you do, including your expert “0%” analysis.
      - TheAlchemist 3y ago
        Well, increasing the share price 10x is not a good benchmark - it should be (and we all know it's not in this case) independent of the CEO - it should be dependent on the economic performance of the company. A CEO with such a huge package as discussed here, may be more inclined to, let's just say be 'overly optimistic'. One such overly optimistic CEO in the same industry recently went to jail. But anyway, the trail is not really about that - it's about proper governance. If you're a public company you get to benefit from a lot of things, but you do have some obligations. And those were pretty clearly broken - keep in mind that this complaint was filled in 2018 - just after the package was awarded. Just to be clear - I do think that what Elon Musk did, lifting Tesla from a startup to a top10 carmaker, is absolutely remarkable But this judgment has nothing to do with it.
- rchaud 3y ago
  In the west they call it a "leveraged buyout".
- ENGNR 3y ago
  He must not be very good at it because he left most of the value behind There are now happy Tesla owners everywhere, and it’s perfectly placed to benefit from the AI wave he knew was coming, enough to found OpenAI
summerlight 3y ago
Having friends in the board is fine. Using it for excessive compensation is not. The court argued that Elon effectively has a full control on the board and they failed to prove whether the package is fair, hence Elon effectively set the package himself. I don't know the technical details on the "fairness" so won't talk about this though.
abduhl 3y ago
And because Elon isn’t going to be granted his bonus shares, even more of that will go to others shareholders instead of to Musk. And that’s the point. Let 10 be “no value to other shareholders, all value to Musk” and 0 be “all value to other shareholders, no value to Musk.” That Elon’s proposal amounted to 2.5 instead of 2.1 isn’t the point, it’s that the Board never even tried to negotiate for a number other than 2.5.
deleted 3y ago
[deleted]
1vuio0pswjnm7 3y ago
"That's the case for many, if not most public companies." But even if true what effect does that have on her arguments. She never claims having these relationships is unusual. She only states that the minority shareholders were not informed about them. "Yet, it amounted to a huge gamble - multiplying the value of a 50B company by over 10x -, which in case of success the board agreed to reward with 6% of shares." Her opinion emphasises that Musk indicated, repeatedly, he had no intention of ever leaving Tesla. What was the gamble. No matter what happens he still stays working there forever. Where is the leverage. Musk was even dumb enough to admit he was "negotiating against himself". Try going to your boss, promising you will never, ever leave and then ask them for a raise.^1 Imagine the boss has no personal relationship with you and acts in the best interests of the company. 1. Just in case anyone becomes confused: I am not suggesting what Musk was "negotiating" was a "raise", I am simply using as a hypothetical a more common scenario amongst mere mortals where compensation is being negotiated and the threat of leaving can be used as leverage.
- credit_guy 3y ago
  > Try going to your boss, promising you will never, ever leave and then ask them for a raise. That was not a raise, it was a contingent payout. One could argue that kept him focused. Once done, he could scatter his attention to things like hostile takeovers and the meaning of free speech.
  - kklisura 3y ago
    > 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. One could argue, as judge argued in the above excerpt, that his 21.9% ownership (before this compensation) of Tesla is what could keep him focused...

by epups 3y ago

TheLoafOfBread 3y ago

> The decision says that Musk was close friends with many members of the board so he effectively controlled it. That's the case for many, if not most public companies. In Eastern Europe we were calling this tunneling of a company - create a tunnel with help from inside to get riches out and leave the shell to its own demise.

clipsy 3y ago
> In Eastern Europe we were calling this tunneling of a company - create a tunnel with help from inside to get riches out and leave the shell to its own demise. Elon prefers to call it “boring.”
Taek 3y ago
Increasing the share price by 10x and turning the Model 3 into the worlds best selling vehicle is hardly "leaving the shell to its own demise" *edit: Model Y
- NERD_ALERT 3y ago
  The Model 3 is not even close to the “best selling vehicle of all time” by any metric.
  - Taek 3y ago
    https://thedriven.io/2023/05/26/tesla-model-y-overtakes-corolla-to-be-worlds-best-selling-car-in-2023/ https://thedriven.io/2023/05/26/tesla-model-y-overtakes-coro... I guess it was the Model Y!
    - josefx 3y ago
      Best selling car over a cherry picked time span is quite far from "best selling car of all time".
- TheAlchemist 3y ago
  I think we should wait 1-3 years to judge. If Tesla doesn't live up to the hype it created - and I believe there is virtually 0% chance it does - and the stock inevitably crashes - say 90% from here, will your judgement be the same ?
  - kortilla 3y ago
    Yes, he delivered a 10x return to those shareholders that approved. If they choose to stay invested now and lose money, that’s all on them. They know everything you do, including your expert “0%” analysis.
    - TheAlchemist 3y ago
      Well, increasing the share price 10x is not a good benchmark - it should be (and we all know it's not in this case) independent of the CEO - it should be dependent on the economic performance of the company. A CEO with such a huge package as discussed here, may be more inclined to, let's just say be 'overly optimistic'. One such overly optimistic CEO in the same industry recently went to jail. But anyway, the trail is not really about that - it's about proper governance. If you're a public company you get to benefit from a lot of things, but you do have some obligations. And those were pretty clearly broken - keep in mind that this complaint was filled in 2018 - just after the package was awarded. Just to be clear - I do think that what Elon Musk did, lifting Tesla from a startup to a top10 carmaker, is absolutely remarkable But this judgment has nothing to do with it.
rchaud 3y ago
In the west they call it a "leveraged buyout".
ENGNR 3y ago
He must not be very good at it because he left most of the value behind There are now happy Tesla owners everywhere, and it’s perfectly placed to benefit from the AI wave he knew was coming, enough to found OpenAI

summerlight 3y ago

Having friends in the board is fine. Using it for excessive compensation is not. The court argued that Elon effectively has a full control on the board and they failed to prove whether the package is fair, hence Elon effectively set the package himself. I don't know the technical details on the "fairness" so won't talk about this though.

abduhl 3y ago

And because Elon isn’t going to be granted his bonus shares, even more of that will go to others shareholders instead of to Musk. And that’s the point. Let 10 be “no value to other shareholders, all value to Musk” and 0 be “all value to other shareholders, no value to Musk.” That Elon’s proposal amounted to 2.5 instead of 2.1 isn’t the point, it’s that the Board never even tried to negotiate for a number other than 2.5.

deleted 3y ago

[deleted]

1vuio0pswjnm7 3y ago

"That's the case for many, if not most public companies." But even if true what effect does that have on her arguments. She never claims having these relationships is unusual. She only states that the minority shareholders were not informed about them. "Yet, it amounted to a huge gamble - multiplying the value of a 50B company by over 10x -, which in case of success the board agreed to reward with 6% of shares." Her opinion emphasises that Musk indicated, repeatedly, he had no intention of ever leaving Tesla. What was the gamble. No matter what happens he still stays working there forever. Where is the leverage. Musk was even dumb enough to admit he was "negotiating against himself". Try going to your boss, promising you will never, ever leave and then ask them for a raise.^1 Imagine the boss has no personal relationship with you and acts in the best interests of the company. 1. Just in case anyone becomes confused: I am not suggesting what Musk was "negotiating" was a "raise", I am simply using as a hypothetical a more common scenario amongst mere mortals where compensation is being negotiated and the threat of leaving can be used as leverage.

credit_guy 3y ago
> Try going to your boss, promising you will never, ever leave and then ask them for a raise. That was not a raise, it was a contingent payout. One could argue that kept him focused. Once done, he could scatter his attention to things like hostile takeovers and the meaning of free speech.
- kklisura 3y ago
  > 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. One could argue, as judge argued in the above excerpt, that his 21.9% ownership (before this compensation) of Tesla is what could keep him focused...