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Elon Musk's $56B Tesla compensation voided by judge
- benzible 3y agopreviously: https://news.ycombinator.com/item?id=39196390 https://news.ycombinator.com/item?id=39196390
- apapapa 3y agoHe wanted to give himself a $56B compensation?
- xcv123 3y agoThe shareholders voted to pay him $50B compensation if he achieved specific milestones https://www.detroitnews.com/story/business/autos/mobility/2018/03/21/tesla-shareholders-vote-musks-ambitious-pay-package/33144441/ https://www.detroitnews.com/story/business/autos/mobility/20...
- koolba 3y agoWhich 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?
- X6S1x6Okd1st 3y agoDid you read the article or the ruling?
- s1artibartfast 3y agoIt isn't really an article. Did you find the ruling? Everything I saw said it was approved by a large majority, and viewed as extremely ambitious goals at the time.
- aw1621107 3y ago> Everything I saw said it was approved by a large majority, and viewed as extremely ambitious goals at the time. Both of these are addressed in the ruling [0]. The shareholder approval was effectively void due to material omissions, and it seems there's some dispute on how ambitious the goals actually were. [0]: https://courts.delaware.gov/Opinions/Download.aspx?id=359340 https://courts.delaware.gov/Opinions/Download.aspx?id=359340
- pdonis 3y agoNot only that, but the judge found that the Board members basically had serious conflicts of interest because of their personal relationships with Musk, meaning that they were not independent representatives of shareholder interests in any meaningful sense.
- Taek 3y agoYes I did, and I don't see sound justification for the ruling. The judge says the compensation was biased, rather than providing justification for establishing that there was too much compensation. The judge provided a sensational quote: "Is the richest man on Earth overpaid?" - completely ignoring any business value that he has brought to Tesla, a key element in determining whether a compensation package is responsible from a fiduciary standpoint. Nothing in the article convinces me that the ruling is just and that the judge was acting in the fiduciary interests of Tesla shareholders.
- s1artibartfast 3y agoThe argument boiled down to the idea that Elon already stood to make 100B by hitting the milestones, so it's more Milestone based incentives had no impact.
- ModernMech 3y ago> completely ignoring any business value that he has brought to Tesla According to the ruling, Musk’s lawyers failed to argue causality during trial. The judge can’t credit Musk for what Musk himself doesn’t argue.
- aw1621107 3y agoIt's not that they failed to argue causality, but they did not prove it. From II.C.b.vii (The Hindsight Defense): > Defendants finally argue from hindsight. They claim the Grant was fair because it worked: “Tesla thrived because of the 2018 Plan.” With this argument, Defendants ask the court to infer a direct causal relationship between the Grant and Tesla’s subsequent performance. But Defendants failed to prove that Musk’s less- than-full time efforts for Tesla were solely or directly responsible for Tesla’s recent growth, or that the Grant was solely or directly responsible for Musk’s efforts. This last argument is empty rhetoric, not evidence of fair price.
- ModernMech 3y agoThe judge characterized it as “made no effort” so it’s a little of both.
- koolba 3y agoYes and it doesn’t make sense to me. They had what would be considered moonshot goals for a car company, a compensation package attached to them, and he hit the numbers. Pay the man! How they arrived at those numbers is nowhere near as relevant as coming to an agreement and meeting the targets. It’s the complete opposite of all the situations where the CEO burns down the office tower and jumps out the window with a golden parachute.
- lylejantzi3rd 3y ago> It’s the complete opposite of all the situations where the CEO burns down the office tower and jumps out the window with a golden parachute. Interesting observation. I wonder how we wound up at a place where all of the incentives are the exact opposite of what they should be.
- ModernMech 3y ago> coming to an agreement and meeting the targets. That’s the crux of the whole lawsuit. The judge found that the whole process of coming to an agreement in this case was Musk talking to a mirror. If there were an actual fair process here and it arrived at $55B then the judge wouldn’t have found as she did. That’s why the shareholder lawsuit was successful.
- X6S1x6Okd1st 3y agoIt seems like you disagree with the ruling, which is different than not understanding the problem
- leetgirl83 3y agoThe guy that sued and just made Elon Musk lose 55 Billion dollars only had: NINE SHARES OF TESLA STOCK.
- bparsons 3y ago[flagged]
- adolph 3y agoWould 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 3y agoIt may have felt less if they had 10,000
- mise_en_place 3y agoReally 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)
- rtsil 3y agoIf 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.
- mise_en_place 3y agoIt doesn't matter what I believe, the court should have a higher standard when determining legal standing for cases like this. Otherwise it reduces overall faith in the US court system and undermines the rule of law.
- erupt7893 3y agoAnyone 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.
- s1artibartfast 3y agoThe 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-elon-musks-multibilion-dollar-compensation-plan.html https://www.cnbc.com/2018/03/21/tesla-shareholders-approve-e...
- lolinder 3y agoThe 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.
- goshx 3y agoThis is absurd. Elon deserves the package.
- batiudrami 3y agoDoes anyone truly deserve $50Bn compensation for anything?
- Meekro 3y agoYes-- 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.
- datavirtue 3y agoThe stock doesn't pay dividends. Why not pay dividends and let investors purchase more stock with the proceeds. Smells like speculation and an invitation to getting sued and prosecuted.
- josenyc 3y agoThat's beyond ridiculous. What true value has he generated? Also if the stock tanks then shouldn't investors have a right to strip some of that compensation? 50 billion to millions of investors and 50 million to one guy is hardly a fair trade. Not to mention how many times he's promised to deliver new features or products and comes up terribly short.
- xcv123 3y agoTesla market cap is $600B. The shareholders made a lot of money. That was the deal.
- kortilla 3y agoHe was paid to be CEO and drive the company towards particular goals. The entire point of leadership is to make sure those happen, not to do them yourself. You can claim the amount should be lower, but then your argument is with the shareholders who came up with the proposal and approved it.
- Meekro 3y agoIt'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 https://twitter.com/elonmusk/status/1752491924848820595
- aw1621107 3y 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 3y agoLegal 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 3y ago[dupe] More discussion: https://news.ycombinator.com/item?id=39196390 https://news.ycombinator.com/item?id=39196390