Yes, because you want to encourage proper disclosure.
Long time no see, by the way.
The recent election has to have been weird for you, as someone who lived in Venezuela. You have now twice experienced people voting for a populist with the declared goal of the destruction of their democratic system and the rule of law.
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Of course. But generally, you can’t force a change of the laws that govern the case after the case is over. The issue for Tesla isn’t that it lacks the ability to do any of these things. They simply don’t get to have these things undo a case they already lost.
Tesla can change its domicile (if they haven’t already - I know it was approved by the shareholders), and issue Musk a new pay package that would then be governed by the corporate law of Texas. But that would be a new action - not a retroactive legalization of the action that was taken many years ago.
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The absurdity of all this is that a group of clever lawyers can search for a willing shareholder (in this case one owning under 10 shares) and then build a case around that one shareholder against the company. Then, if they win the case, they can extract hundreds of millions from all the collective shareholders (“the company”) for their [usually excessive] fees. If they lose the case, well, worst case is they’ve spent a bunch of hours on it, and it becomes a losing “investment”. Seems like the incentives are rather bad with the system set up like this.
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You don’t understand how the law works in the United States or you wouldn’t be asking that question.
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Let’s explore that a bit. Should there be a minimum number of shares or percentage of ownership before one can sue? If so, how does that represent equal justice under the law if only those with a certain amount of wealth are afford the privilege of justice?
I get your complaint, but the remedy is something worse. This case would have never even made it to trial if there was not sufficient evidence and there are not likely to be a ton of situations where a group of clever lawyers are going to find some random shareholder to repeat this process; otherwise, we would already be seeing a lot of these especially in the DE courts.
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It is blatant corruption and lawfare. Americans don’t like it.
It will be uprooted. Watch !
No, there should be no minimum. However, just because someone is a member of a group doesn’t mean that they can find a lawyer and sue the entire group (ironically including themselves) such that any damages are paid by the group, to the group, with the lawyers taking a hefty fee. In the end, the only money transferred is TO the lawyers, nobody else sees any material benefit in that particular kind of case. So, yes, I would say that cases in which the outcome can only possibly benefit the lawyers should somehow be limited in scope to reduce the perverse incentives to lawyers.
How does a remedy that can only benefit the lawyers be considered equal justice under the law?
The lawyers are working on it. That’s part of why companies keep piling more and more and more things into their list of potential risks in their SEC filings. The latest Google 10K has 14 pages devoted to “Risks”. That’s out of about 35 pages of text and another 50+ pages with the various numbers and proforma stuff.
The general incentives aren’t terrible. Public companies have to follow the law - and part of that is that minority shareholders (generally) get more procedural protections than they would in private companies. You don’t get to run a public company the same way you would a private company.
The award in this case is absurdly high, because the compensation award to Musk was insanely high. In theory, these plaintiff’s lawyers just saved Tesla shareholders several tens of billions of dollars. The shareholders got all the benefits of their bargain with Musk, and don’t have to pay him the ~$55 billion in stock options. Their fee is a small portion of that savings - but it’s astronomical in absolute terms, because Musk’s pay package was astronomical in the first place.
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Again, that’s not exactly true. Right now, Tesla (and its non-Musk shareholders) have been freed from a $55 billion obligation to Musk. That’s an enormous benefit to the company, at least on paper.
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Meh. You surmise that they are working on it. Do you have evidence that they are working on it?
I remain convinced that if it was as easily as you imply, we would ALREADY see evidence of it. Tesla is hardly the first company ever to pay the CEO a lot of money.
The Musk pay package is about four orders of magnitude above what I would consider “a lot of money”
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Amazing how insightful you are. Do you do astrology?
The Captain
o o o o o o o o
The case has not ended. It will be really interesting to see how it develops.
When you are as rich as Elon Musk, do you need more money? From all the data I have collected it seems that Elon’s concern is that activist investors could derail Tesla’s mission. Not too long ago some investors were asking for share buybacks to boost the share price. For a growing company with ambitious expansion plans that require mountains of cash, share buybacks is about as absurd as it gets.
Lots of tech companies have two classes of ordinary shares, one class with one vote per share and another with ten votes per share that insider get. The purpose is for founders and insiders not to lose control over the company. Tesla didn’t take this precaution when it was founded. Delaware allows the two kinds of shares when the company is incorporated but it does not allow changing it later on. This, in the name of shareholder protection, makes sense.
Elon has said, and I believe him, that he wants the pay package not for the money but to get to 25% ownership so as not to lose control over Tesla’s destiny.
It’s really simple to understand Captain. I have explained it to a 5 year old. There are 50 states in the union of the United States of America and each state has their own laws on how a company incorporates. Each company can decide in which state they would like to domicile(incorporate) their company. The reason they pick one state over another is because that state may have laws that are more business friendly. Not every state is the same nor should they be.
Does that help you?
It did not convey any new information so the answer is no.
The Captain
You can’t always get what you want.
It’s not Musk’s company. Unlike all his other companies, Tesla’s a public company. Not a private company. Musk doesn’t just get to be completely in charge of the company just because he wants to be. He’s “just” the CEO, and he can be fired if the board wants to fire him.
That said, it’s hard to take his concern very seriously. There’s probably not a single public-company CEO that’s less likely to “lose control” of the company than Musk. The board is filled with allies and the shareholders are huge fans. How credible is this concern?
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It could not happen to a nicer guy.
I just realized Musk has been divorced three times. Each divorce was less expensive than this.
Realization number two, his tax bill will be lower but not for the reasons he wanted.
There seems to be a lot of wishful thinking these days. It is ugly how mean the underlying wishes are.
Maybe he could have thought that over before he cashed out a bunch to buy a failing social media site?
Or should he be bailed out for having made a bad decision by people who had nothing to do with that decision?
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Why hold bad financial decisions against a CEO? Seems odd.
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