Pretty sure the court’s opinion might be relevant, especially if the terms aren’t properly disclosed, or if he doesn’t live up to whatever standards are set at the time of the compensation agreement. You know, like last time.
Nah. The terms were properly disclosed. Musk more than lived up to everything in the compensation agreement. The judge’s fantasies will be overruled on appeal. What she did was a grotesque parody of justice.
Yes, that’s a prediction.
-IGU-
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Again, the ruling didn’t turn on whether the terms were disclosed. It turned on the fact that neither the Board nor Tesla’s general counsel were independent from Musk, and that wasn’t disclosed to shareholders. Negotiations with a CEO don’t have to be adversarial, but the default position is that they should be conducted by individuals who are independent from the CEO - which is why procedures like creating a compensation committee (so that related Directors are not part of the negotiating process) and hiring outside counsel are common. Those procedures aren’t mandatory - a corporation can decline to have the negotiations performed by independent representatives. But if they do that and rely on a shareholder vote to legitimize that choice, they have to make sure the shareholders know that.
Judge is an idiot talking gibberish and no common sense.
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Nonsense. The board members were well known to shareholders, and had been elected and re-elected by us. They were as independent as is typical of board members of companies with founders on the board. They weren’t a bunch of randos off the street, they were people that Musk trusted to be responsible and provide good advice and expertise.
And what people paid attention to most was not the process of negotiation, but the result. The compensation plan was transparent and clear and overwhelmingly approved. That Musk was happy to work for the company with no compensation unless the results were spectacular was widely regarded as truly over the top. We were and are happy with it, and for the judge to pretend otherwise after the fact is patently ridiculous.
This judicial overreach will be overturned on appeal.
-IGU-
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Which doesn’t make them independent. Yes, there are companies with founders on the board and serving in C-Suite offices - and so not all of the directors will be independent. It’s for that reason why mechanisms like compensation committees (which wall off the non-independent directors) and outside counsel (which can negotiate at arm’s length) are utilized. Tesla didn’t do that, and instead (per the judge) allowed the compensation negotiation process to be conducted by people who were not independent from Musk.
Which, again, is permissible - but that has an impact on the shareholder review. It doesn’t matter that the compensation plan was transparently presented, if shareholders weren’t advised whether the plan was the result of an independent negotiation or Musk negotiating with people who did not have an independent relation to him.
Since not all shareholders “were and are happy with it” - and since these rules exist to protect even minority shareholders - the lack of independence of the negotiators becomes relevant to the judicial analysis. Again, the legal issue is not whether the substance of the actual compensation plan was disclosed, but the lack of independence of the negotiators.
The judge found that Tesla could have gotten all of the results that Musk delivered without having to give him $50-60 billion…that given the circumstances, a truly independent deal could have been had for far less. Seems right to me - I can’t imagine that Musk would have walked away from Tesla if he had a deal that could have gotten him “only” $30 billion or $20 billion or whatever, if anyone on the negotiating team had actually tried to cut an arm’s-length bargain with him rather than just give him what he wanted. Whether you agree with that or not, that’s the issue - not whether the terms of the compensation package itself were adequately presented to the shareholders as part of the vote.
You nailed it. The guy with 9 shares was not happy. Let’s give the leeches/lawyers $6B they are asking for in fees.
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I know you’re being a bit sarcastic, but this is generally correct.
Nobody forced Tesla to go public, and open itself up to lots of minority outside shareholders. But once you do that, there are different rules than those that govern a closely-held company owned only by the founders. Those rules provide protections to the guy who owns 9 shares, just like the one with 9 million. Whether those tiny shareholders should get protections can be an interesting question - but it’s not one that’s going to be considered on appeal in the Tesla case. Musk has always appeared to chafe at the idea that he can’t act at Tesla like he can at the private companies he more fully controls - but there’s a reason for that, and Tesla has to abide by different formalities and rules than a closely-held private founder-led company.
As for the lawyers’ fees, who knows if they’ll get $6B. But they did just free Tesla’s shareholders from a $60B obligation, which is a pretty valuable benefit to those shareholders.
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There is only one way this ends. Leeches get $0. Musk gets 25%.
Tesla shareholders are happy as we go become a multi $T company.
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Why would that make you happy?
Would you not be more happy if he only received 22% - or the least amount possible to keep him? Every share he receives dilutes the value of your shares. It is not in your financial interest for him to get paid more than the absolute minimum to keep him. That may be an amount less than 25% ownership.
Here ya go:
Voting control.
Voting control.
Voting control.
After the media knee jerk shock that musk wants 12% more SHARES, ie GREED blah blah blah
Musk clarified that VOTING CONTROL does not mean “stock ownership”.
Musk said he wants guaranteed CONTROL of 25% of the votes.
Yeah. The media keeps pushing the Greed meme.
But that’s not what Musk said, nor what he claims to have meant.
FWIW
ralph
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What leads you to believe that these special shares - that by their very design reduce the voting rights of other share classes - would be worthless or otherwise not have a cost - and in no way reduce the value of other shares that now have less voting authority?
Historically, shares that have higher voting authority are worth more.
Meta created B shares that have more voting rights than A shares. Those shares have value. That value was derived from diluting the value of A shares.
You can’t create something from nothing. If you are going to give Musk more voting authority then it MUST come from existing shareholders - and that has a cost.
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But it’s also not possible for a public company to do what Musk claims to want.
IANASL, but all of the analysis I saw after he floated the idea of gaining more control of the company pointed out that you cant create these kinds of supra-voting shares after you go public. So the only way that Musk can get what he claims to want is if he obtains 25% ownership of the company.
Regardless of what motives drive his heart of hearts, the Board doesn’t appear to have the option to give him 25% voting control without also giving him an unprecedented payday. Hawkwin is correct to point out that giving Musk what he is asking for would come at a cost to shareholders, and that shareholders would benefit if someone actually negotiated with Musk and tried to get him to accept less than his first offer and the one he drew up himself.
LOLOL.
yeah. yeah. yeah. It ‘can’t’ be done. and all that.
Musk floated his ‘want’.
NOW, we watch the drama unfold.
And, eventually, we’ll better know what can and can’t be done.
Personally, I would grant Musk total vote control of my shares.
If it comes to a voter proposal, I will certainly vote FOR giving him some kind of guarantee of VOTING CONTROL of 25%.
If it ‘dilutes’ me, but I become a MultiTeslanaire… I’ll learn to live with the loss.
ralph
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You are free to do that via proxy.
While your deference to Musk may be unwavering, you might consider that research that suggests that such dual-class ownership has been found to be detrimental to profitability.
https://onlinelibrary.wiley.com/doi/10.1111/j.1540-6261.2009.01477.x
Abstract:
Using a sample of U.S. dual-class companies, we examine how divergence between insider voting and cash flow rights affects managerial extraction of private benefits of control. We find that as this divergence widens, corporate cash holdings are worth less to outside shareholders, CEOs receive higher compensation, managers make shareholder value-destroying acquisitions more often, and capital expenditures contribute less to shareholder value. These findings support the agency hypothesis that managers with greater excess control rights over cash flow rights are more prone to pursue private benefits at shareholders’ expense, and help explain why firm value is decreasing in insider excess control rights.
Since I mentioned META, I am reminding of their recent $46 billion dollar loss on the Metaverse - a passion project of Zuck.
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True. Again, IANASL - I’m just going off what the financial writers said. Before the IPO you can structure these types of weird supra-voting classes of shares, but you public companies can’t just do that. So we’ll find out if they’re right, presumably.
But the best possible outcome is for someone at Tesla to actually sharpen their pencil with Musk and get you both - becoming a multi-teslanaire and having the lowest dilution possible. It’s not all or nothing, where Tesla either has to give Musk a huge chunk of the company to get his services or Musk just quits.
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Yes!
And this win/win is where I think it’ll wind up.
ralph knows there will, of course, be ‘sore losers’ who persist in being some kind of victim.
Maybe. For this to happen, both Musk and Tesla have to be willing to accept a process under which the people negotiating on behalf of Tesla are independent from Musk, and thus have the space to push for a deal that is less than what Musk wants. As noted upthread, when a board has directors and a general counsel that have relationships/ties to the CEO, this is usually done by creating an independent compensation committee and hiring outside counsel. That process helps protect the company and shareholders.
That’s not what Tesla did last time, it’s certainly not in Musk’s interest for it to happen this time. And as long as he holds out hope of reversing the court decision on appeal he might be especially hostile to the idea of doing it this time.
It’s a rough box for the Board - it will be quite interesting to see what they do.
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It is interesting that non Tesla shareholders have so may opinions about Tesla share ownership.
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The judge is wrong. Tesla did do that.
The judge pretending she knew how things would have unfolded under different conditions is just made up BS.
If the compensation were ordinary, likely Tesla would have gotten ordinary results. Musk would have been distracted by something shiny and more impossible. The judge is clueless.
Odd that every shareholder I’ve seen discussing this decision considers it a s*** sandwich.
The judge will be reversed on appeal. Her decision was absurd.
Utterly wrong. He’s not getting paid a salary, he’s participating in outsize appreciation. If he wins, I win. I certainly don’t want him getting “the absolute minimum” necessary to keep him. I want him getting enough to inspire him to great things, which is exactly how it worked.
You know, you don’t seem to have much imagination. The most trivial solution would be that a large number of common stock owners pledge their voting rights to Musk. I’m fairly confident that would get him to 25% or more fairly quickly. Despite his creeping political insanity, most individual shareholders seem inclined to trust him.
-IGU-
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