3 ms·

From everything I've read and learned about this Musk comp drama, it has nothing to do with how much he's getting paid and everything to do with how they create

From everything I've read and learned about this Musk comp drama, it has nothing to do with how much he's getting paid and everything to do with how they created the comp package. The comp plan was presented as created by an independent board, when the truth was the directors had a direct conflict of interest that they did not disclose to the shareholders. And that under Delaware law makes it a no-no and allows shareholders to sue, which they did. They were "mislead." Had they been more transparent, they could have given Musk triple the comp package and everything would have been above board. The issue at the end of the day is transparency to shareholders, not the $ amount, or whether he did or did not earn it.

gitfan86 3y ago
Which is why people are talking about moving companies out of Delaware. Why would an executive want to work at a company if after he achieves amazing results, his compensation can Ben clawed back, due to a missing one sentence disclaimer on a proxy statement?
- vrc 3y ago
  Uhhh, when the deal is for a $55bn package, an executive should pay a lawyer to make sure that that sentence is included, and ideally that it’s truthful if included. Delaware is the most shareholder friendly state for business and has so much clear precedence it makes operating a business easy. If you fail at that basic level of governance, it is either idiocy or malfeasance. Can’t have it both ways. Also, nobody serious is talking about moving companies out of Delaware. Elon is tweeting about it.
- ado__dev 3y ago
  I actually see this as a strong reason to stay. Again the issue isn't compensation and whether it was too much, it's that the shareholders were mislead. If the board had disclosed they had a conflict of interest, and the shareholders still voted for the package (which I believe they still would have), it would be a moot point, but they did not. They didn't follow the rules, and that has consequences. Laws and contracts aren't worth the paper they're written on if they're not enforced, and failure to follow the law, which they were all aware of, has consequences.
  - gitfan86 3y ago
    Im not suggesting that all rules should be removed. I'm suggesting that if the laws and rules exist to protect shareholders, the courts should take shareholders' expectations into account. None of us who owned TSLA in 2018 looked at the board of directors, which included Musk's brother, and assumed it was a totally independent board, regardless of disclosures. I sold some of those TSLA shares and moved them into NVDA last year and I have zero expectation that the NVDA BoD is 100% free of undisclosed conflicts of interest. If the Delaware court system does not care about my expectations, fine, but they shouldn't claim to be helping me.
    - ModernMech 3y ago
      > None of us who owned TSLA in 2018 looked at the board of directors, which included Musk's brother, and assumed it was a totally independent board, regardless of disclosures. At least one person assumed it was independent, and that person sued. But if everyone knew about how conflicted the board is, how come the proxy went to such great lengths to refer to the board as "independent"? The Proxy failed to disclose any of the Compensation Committee members’ actual or potential conflicts with respect to Musk.747 In fact, the Proxy repeatedly described the members of the Compensation Committee as independent, stating: “The[] [Grant] discussions first took place among the members of the Compensation Committee . . . all of whom are independent directors;”748 and “[t]he independent members of the Board, led by the members of the Compensation Committee, spent more than six months designing [the Grant].”749 The Proxy’s introductory letter is “[f]rom the Independent Members of Tesla’s Board of Directors,” and the first four signatories are Compensation Committee members Gracias, Ehrenpreis, Denholm, and Buss.750 Notably, Gracias signed as “Lead Independent Director.”751 The description of the Compensation Committee members as “independent” was decidedly untrue as to Gracias and proved untrue as to the remaining committee members. At a minimum, Musk’s relationships with Ehrenpreis and Gracias gave rise to potential conflicts that should have been disclosed.752 Ultimately, all of the directors acted under a controlled mindset, calling into question the disclosure as to each of them. Overall, Defendants failed to prove that the information about conflicts was adequately disclosed. The Proxy was materially deficient on this point. The judge thinks the reason they did this was to fool people. > I have zero expectation that the NVDA BoD is 100% free of undisclosed conflicts of interest. It's not about mere "undisclosed conflicts", it's that the compensation committee was so conflicted that it was effectively controlled by Musk.
- hhiicc 3y ago
  [dead]
- tqi 3y ago
  Why would investors want to put money into a company that moved out of Delaware because they didn't want to have to properly disclose conflicts of interest?
- rurp 3y ago
  It's wild to still be seeing random Elon tweets show up as serious comments. There are a number of reasons that so many companies incorporate in Delaware, and Elon having to follow some of the rules doesn't negate anything, despite him being cranky about it.
  - mamonster 3y ago
    Well you see a Delaware court forced him to buy Twitter, and now a Delaware court is cancelling his package. Knowing that Biden dislikes Musk, maybe this is how the Democrats are going after him? /s
- rsynnott 3y ago
  ... I mean, misleading investors being a problem isn't an exclusively Delawarian problem. Delaware's key difference is that it has comparatively fast and efficient courts, so you might drag it out longer elsewhere, but in general, if you are a company, you should plan on avoiding lying to shareholders. Realistically, if a jurisdiction allowed the blatant ripping off of shareholders, companies in that jurisdiction wouldn't be seen as investable, so most jurisdictions will avoid that. Would you invest in a company which has just moved out of Delaware for the purposes of avoiding the high quality of shareholder protection offered by Delaware? Like, that seems like asking for trouble. > due to a missing one sentence disclaimer on a proxy statement? That wasn't the case here.

gitfan86 3y ago

Which is why people are talking about moving companies out of Delaware. Why would an executive want to work at a company if after he achieves amazing results, his compensation can Ben clawed back, due to a missing one sentence disclaimer on a proxy statement?

vrc 3y ago
Uhhh, when the deal is for a $55bn package, an executive should pay a lawyer to make sure that that sentence is included, and ideally that it’s truthful if included. Delaware is the most shareholder friendly state for business and has so much clear precedence it makes operating a business easy. If you fail at that basic level of governance, it is either idiocy or malfeasance. Can’t have it both ways. Also, nobody serious is talking about moving companies out of Delaware. Elon is tweeting about it.
ado__dev 3y ago
I actually see this as a strong reason to stay. Again the issue isn't compensation and whether it was too much, it's that the shareholders were mislead. If the board had disclosed they had a conflict of interest, and the shareholders still voted for the package (which I believe they still would have), it would be a moot point, but they did not. They didn't follow the rules, and that has consequences. Laws and contracts aren't worth the paper they're written on if they're not enforced, and failure to follow the law, which they were all aware of, has consequences.
- gitfan86 3y ago
  Im not suggesting that all rules should be removed. I'm suggesting that if the laws and rules exist to protect shareholders, the courts should take shareholders' expectations into account. None of us who owned TSLA in 2018 looked at the board of directors, which included Musk's brother, and assumed it was a totally independent board, regardless of disclosures. I sold some of those TSLA shares and moved them into NVDA last year and I have zero expectation that the NVDA BoD is 100% free of undisclosed conflicts of interest. If the Delaware court system does not care about my expectations, fine, but they shouldn't claim to be helping me.
  - ModernMech 3y ago
    > None of us who owned TSLA in 2018 looked at the board of directors, which included Musk's brother, and assumed it was a totally independent board, regardless of disclosures. At least one person assumed it was independent, and that person sued. But if everyone knew about how conflicted the board is, how come the proxy went to such great lengths to refer to the board as "independent"? The Proxy failed to disclose any of the Compensation Committee members’ actual or potential conflicts with respect to Musk.747 In fact, the Proxy repeatedly described the members of the Compensation Committee as independent, stating: “The[] [Grant] discussions first took place among the members of the Compensation Committee . . . all of whom are independent directors;”748 and “[t]he independent members of the Board, led by the members of the Compensation Committee, spent more than six months designing [the Grant].”749 The Proxy’s introductory letter is “[f]rom the Independent Members of Tesla’s Board of Directors,” and the first four signatories are Compensation Committee members Gracias, Ehrenpreis, Denholm, and Buss.750 Notably, Gracias signed as “Lead Independent Director.”751 The description of the Compensation Committee members as “independent” was decidedly untrue as to Gracias and proved untrue as to the remaining committee members. At a minimum, Musk’s relationships with Ehrenpreis and Gracias gave rise to potential conflicts that should have been disclosed.752 Ultimately, all of the directors acted under a controlled mindset, calling into question the disclosure as to each of them. Overall, Defendants failed to prove that the information about conflicts was adequately disclosed. The Proxy was materially deficient on this point. The judge thinks the reason they did this was to fool people. > I have zero expectation that the NVDA BoD is 100% free of undisclosed conflicts of interest. It's not about mere "undisclosed conflicts", it's that the compensation committee was so conflicted that it was effectively controlled by Musk.
hhiicc 3y ago
[dead]
tqi 3y ago
Why would investors want to put money into a company that moved out of Delaware because they didn't want to have to properly disclose conflicts of interest?
rurp 3y ago
It's wild to still be seeing random Elon tweets show up as serious comments. There are a number of reasons that so many companies incorporate in Delaware, and Elon having to follow some of the rules doesn't negate anything, despite him being cranky about it.
- mamonster 3y ago
  Well you see a Delaware court forced him to buy Twitter, and now a Delaware court is cancelling his package. Knowing that Biden dislikes Musk, maybe this is how the Democrats are going after him? /s
rsynnott 3y ago
... I mean, misleading investors being a problem isn't an exclusively Delawarian problem. Delaware's key difference is that it has comparatively fast and efficient courts, so you might drag it out longer elsewhere, but in general, if you are a company, you should plan on avoiding lying to shareholders. Realistically, if a jurisdiction allowed the blatant ripping off of shareholders, companies in that jurisdiction wouldn't be seen as investable, so most jurisdictions will avoid that. Would you invest in a company which has just moved out of Delaware for the purposes of avoiding the high quality of shareholder protection offered by Delaware? Like, that seems like asking for trouble. > due to a missing one sentence disclaimer on a proxy statement? That wasn't the case here.