5 ms·

That doesn't seem like the judge was acting in the fiduciary interest of Tesal. It seems like the judge was acting in the interest of stopping corporate greed.

by Taek 3y ago

That doesn't seem like the judge was acting in the fiduciary interest of Tesal. It seems like the judge was acting in the interest of stopping corporate greed. The judge had multiple quotes to that effect, including "Is the richest man on Earth overpaid?" - that's not a question you ask for matters of fiduciary responsibility, because it completely ignores the question of how valuable Musk is to Tesla.

bhouston 3y ago
The judge makes clear that he thinks that Musk was likely to stay CEO of Tesla whether or not this pay package occurred. It was already in Musk’s interest to stay given his shareholdings. Remember that this growth of Tesla brought Musk $120B of wealth given his existing shareholdings. That is already a lot of compensation for a job well done.
- s1artibartfast 3y ago
  Which is an interesting argument. If the board should reject any deals, even mutually beneficial ones, because they already have someone in golden handcuffs, then Mutual assured destruction is the only leverage remaining.
  - Taek 3y ago
    Your comment got downvoted (probably because MAD as the only remaining option is strong hyperbole) but the core thrust is sensible. Knowing that a CEO is not going to leave isn't the only relevant factor in discussing increasing CEO comp. Any decent manager understands this about their employees. You may be 100% confident that they won't quit if you don't give them a bonus and also be 100% confident that giving them a bonus (due to moral, motivation, evangelism, etc) is the best outcome for the company anyway. Musk had other companies that were splitting his focus. Sure, without that 6% he'd still be CEO of Tesla. But would he have put more energy instead into SpaceX? Boring Company? Nerualink? OpenAI? When your CEO has so many places to focus his attention, giving him more equity to remain the preferred child makes a lot of sense as a mutually beneficial agreement. *Especially* when that increased compensation is directly tied to performance. And not a trivial outcome, but a serious outcome that brings hundreds of billions of dollars to shareholders.
    - aw1621107 3y ago
      > When your CEO has so many places to focus his attention, giving him more equity to remain the preferred child makes a lot of sense as a mutually beneficial agreement. Alternatively, you could simply condition the compensation on spending a certain amount of time/attention on Tesla. That seems like a much more straightforwards solution of keeping Musk's attention were actually a concern. Perhaps that would warrant a further bump in compensation, but in exchange you get certainty.
      - AlchemistCamp 3y ago
        Basing CEO compensation on time spent instead of performance is a horrible idea, IMO.
        aw1621107 3y ago
        Basing CEO compensation only on time spent may seem like a bad idea, sure, but there's nothing that prevents you from stipulating both performance and time/attention metrics. You may have to offer more equity, but that's all part and parcel of negotiations.
      - s1artibartfast 3y ago
        if you want someone's attention so that they catch you fish, it is better to pay based on fish, not time.
        aw1621107 3y ago
        The two aren't mutually exclusive, and the question here is return on investment, especially if you know said fisherman has strong interests in other ventures. If you're already paying someone to catch you fish, are you going to get more fish by paying them even more or by paying them more and asking them to devote time/attention to catching fish as well?
        s1artibartfast 3y ago
hindsightbias 3y ago
The board had a fiduciary interest and did what was best for Elon. They had no rational other than “I love the guy” and “it’s what he wanted.” The judges only interest is having to act in the best interest in shareholders in the absence of the board performing their duty.
- kklisura 3y ago
  "I love the guy" is an understatement... > The working group included management members who were beholden to Musk, such as General Counsel Todd Maron who was Musk’s former divorce attorney and whose admiration for Musk moved him to tears during his deposition. [1] [1] https://courts.delaware.gov/Opinions/Download.aspx?id=359340 https://courts.delaware.gov/Opinions/Download.aspx?id=359340

by Taek 3y ago

bhouston 3y ago

The judge makes clear that he thinks that Musk was likely to stay CEO of Tesla whether or not this pay package occurred. It was already in Musk’s interest to stay given his shareholdings. Remember that this growth of Tesla brought Musk $120B of wealth given his existing shareholdings. That is already a lot of compensation for a job well done.

s1artibartfast 3y ago
Which is an interesting argument. If the board should reject any deals, even mutually beneficial ones, because they already have someone in golden handcuffs, then Mutual assured destruction is the only leverage remaining.
- Taek 3y ago
  Your comment got downvoted (probably because MAD as the only remaining option is strong hyperbole) but the core thrust is sensible. Knowing that a CEO is not going to leave isn't the only relevant factor in discussing increasing CEO comp. Any decent manager understands this about their employees. You may be 100% confident that they won't quit if you don't give them a bonus and also be 100% confident that giving them a bonus (due to moral, motivation, evangelism, etc) is the best outcome for the company anyway. Musk had other companies that were splitting his focus. Sure, without that 6% he'd still be CEO of Tesla. But would he have put more energy instead into SpaceX? Boring Company? Nerualink? OpenAI? When your CEO has so many places to focus his attention, giving him more equity to remain the preferred child makes a lot of sense as a mutually beneficial agreement. *Especially* when that increased compensation is directly tied to performance. And not a trivial outcome, but a serious outcome that brings hundreds of billions of dollars to shareholders.
  - aw1621107 3y ago
    > When your CEO has so many places to focus his attention, giving him more equity to remain the preferred child makes a lot of sense as a mutually beneficial agreement. Alternatively, you could simply condition the compensation on spending a certain amount of time/attention on Tesla. That seems like a much more straightforwards solution of keeping Musk's attention were actually a concern. Perhaps that would warrant a further bump in compensation, but in exchange you get certainty.
    - AlchemistCamp 3y ago
      Basing CEO compensation on time spent instead of performance is a horrible idea, IMO.
      - aw1621107 3y ago
        Basing CEO compensation only on time spent may seem like a bad idea, sure, but there's nothing that prevents you from stipulating both performance and time/attention metrics. You may have to offer more equity, but that's all part and parcel of negotiations.
    - s1artibartfast 3y ago
      if you want someone's attention so that they catch you fish, it is better to pay based on fish, not time.
      - aw1621107 3y ago
        The two aren't mutually exclusive, and the question here is return on investment, especially if you know said fisherman has strong interests in other ventures. If you're already paying someone to catch you fish, are you going to get more fish by paying them even more or by paying them more and asking them to devote time/attention to catching fish as well?
        s1artibartfast 3y ago

hindsightbias 3y ago

The board had a fiduciary interest and did what was best for Elon. They had no rational other than “I love the guy” and “it’s what he wanted.” The judges only interest is having to act in the best interest in shareholders in the absence of the board performing their duty.

kklisura 3y ago
"I love the guy" is an understatement... > The working group included management members who were beholden to Musk, such as General Counsel Todd Maron who was Musk’s former divorce attorney and whose admiration for Musk moved him to tears during his deposition. [1] [1] https://courts.delaware.gov/Opinions/Download.aspx?id=359340 https://courts.delaware.gov/Opinions/Download.aspx?id=359340