Why the fight over Elon Musk’s pay at Tesla won’t end with shareholder vote

Musk, Tesla, and the Delaware court system may be headed for uncharted legal territory.

See full article...

 

[IncorrigibleTroll]

I voted no on both his comp package and the re-incorporation in Texas. Ask me anything.

Why does an imaginary number raised to the power of an imaginary number produce a real number?

 

[Snark218]

What has primed Americans to so readily follow cult leaders? Between the Musk and Trump worship, my assessment of humanity has taken a severe beating in recent years.

I think the pervasiveness of authoritarian Christianity primes our culture to produce people who have always been told to look to a leader for all the answers, and which identifies those leaders with a social and national power hierarchy.

We've also been balls deep in neoliberal economic policy for several decades and have been realizing that offshoring all the jobs and cutting the social safety net and blithely trusting markets hasn't actually done what Uncle Milty told us all it would do. And I think stagnant wages, declining communities, and wealth polarization have primed people to be angry and frustrated with their lives and all the broken promises and outright lies lobbed glibly at them for years.

And climate denial and vaccine nonsense notwithstanding, on some level everybody knows climate change has finished lacing up its ass-kicking boots, and we took a solid one on the chin from COVID and barely got back up. They may quell some of the conscious cognitive dissonance with conspiracy theories, but I think that deep old part of one's brain stem that cranks up when shit is about to get real doesn't lie.

So people are afraid, and angry, and vulnerable, and overwhelmed, and they consume media that encourages more of all of that, and there's just this firehose of news and opinion and data aimed directly at everyone's faces, and it's a lot of work to figure out what to believe and who to trust and what's real.

And in the face of all that there's a certain personality type that just gives up. They might be intelligent and educated people, but they really just want to be told where to aim their anger and aggression, what to believe, who to trust, and who to follow. They expect that'll be a Great Man, the man with the plan. The world is scary and it sucks and their life isn't what they hoped it would be, and they want that great man to make the world....great again. Whether that's a hazily remembered late-'70s America where they had a good job and a muscle car could drop a hard-R N-bomb without getting fired or a sleek, sexy sci-fi future full of sleek, gleaming rockets and Mars colonies and robots just depends on the age cohort and educational background.

 

[excognita]

This scene from spy x family has no relevance whatsoever.

 

[purposelycryptic]

It's amazing how deluded people are when it comes to cults of personality. They're willing to let someone light their money on fire. They complain about the Government interfering in letting it happen and then when their stake is worthless somehow complain that it was the Government's fault, not the Bozo that lit the match.

Sigh. I just don't understand personality cults.

Especially when it is just such a terrible personality.

I will admit, I got caught up in the idea of Musk being a genius back in the early days, when he put on his good guy mask, was saying all the right things, and making a lot of decisions that just seemed objectively pretty good.

But he dropped that persona years ago, and showed the world his true nature, for all to see. It was basically the exact opposite of the act he had been putting on, so I can't understand how anyone who supported him before would support him after, especially as he's just gotten worse and worse.

 

[MagicVolcano]

"Please give Musk more money as our stock value will tank without it".

 

[OrvGull]

Why would any shareholder (who is not already beholden to Musk) accept this?

institutional shareholders probably won't, but Tesla is something of a meme stock and a lot of retail investors are in it for the Musk cult of personality. SpaceX isn't publicly traded so buying Tesla is their way of showing loyalty to Dear Leader.

 

[Snark218]

Especially when it is just such a terrible personality.

I will admit, I got caught up in the idea of Musk being a genius back in the early days, when he put on his good guy mask, was saying all the right things, and making a lot of decisions that just seemed objectively pretty good.

But he dropped that persona years ago, and showed the world his true nature, for all to see. It was basically the exact opposite of the act he had been putting on, so I can't understand how anyone who supported him before would support him after, especially as he's just gotten worse and worse.

There's a lot of people for whom the idea of admitting they were wrong feels like a betrayal of their entire worldview.

 

[Longmile149]

While I agree that there is no CEO that deserves 1 Billion US$ a year, and much less the $5 10e10 that Musk wants, maybe the payout is justified?
What keeps the price of Tesla stock (I refuse to call it value) up is not the actual, physical company,. It's the star appeal people see in Musk. He is the Kim Khardashian of CEOs - no talent, but loads of fans who adore him.
If he were to be kicked out, the physical company might do better in the very short as well as the long run. But the idiot fans - like the one cited in the FT article - would not buy the stock anymore, and the big investors would loose tens of billions of dollars as the valuation of Tesla comes back to the real world. And I assume that that's why the big investors back the ridiculous pay day. They don't care about the company; they care about their profits

Naw, I don't think so.

You're asking whether [bad thing] may be justified because of [bad thing], and the answer is just...no.

 

[terrydactyl]

"...successful visionary CEOs"

No CEO ever brought a product to market without a cadre of designers and engineers that did the real creative work. So how much was their collective bonus? Even a tiny fraction of $54B?

 

[omarsidd]

The Big Rich Manbaby wants another $56B for shitposting all day on Twitter and being a poster child for privilege derived from segregated societies (ie, apartheid-era South Africa)...
Sigh. The fact anybody is willing to give in to his Dr Evil demands...

 

[Uragan]

Wow. Observing how many people on here allow their feelings about Musk personally and politically to overcome any form of logical reasoning is mind boggling.

Guess who isn't showing any sense of self-awareness here?

Musk took no regular pay for years and almost bankrupted himself to keep the company afloat.

Oh really? Where's the evidence of this?

His pay package was completely tied to the company achieving unprecedented performance. With Musk as the CEO, the company achieved that unprecedented performance.

Except the board knew that some of the milestones would have easily been met and then lied to the shareholders about that.

Musk bet on himself and won.

Musk strongarmed the 2018 compensation package through a non-independent board of directors who then lied to shareholders about it. Why wouldn't he bet on a sure thing that would reward him with billions for basically just doing his job? Who wouldn't do the same?

Now all the haters are here explaining how much "better" the company would be if they dumped him.

Considering how distracted Musk is from running Tesla and is outright admitting to stealing from Tesla to further his other, private companies and extorting shareholders to pass this new compensation package... yes, Tesla would be better without him. Maybe the stock price wouldn't be as high as it is, but they wouldn't have a CEO who's stuck in a k-hole.

My suggestion is to stop hating and actually get to work and do something great.

Maybe take your own advice here, because your posting isn't "great" by any stretch.

Then you won't have to spend any time being jealous and hating a person who gets stuff done and is actually changing the world for the better.

Who says any of us who are critical of Tesla or Musk are jealous? The man isn't going to give you a horse.

 

[Bg8780]

Did I catch that right? The lawyers are asking for five billion dollars? I feel like I’m living in a capitalist fairytale.

Ye best start believing in capitalist fairtytales, Mr. KnightRT. You're in one.

 

[stormcrash]

Man the delusions of the Musk stans and boosters are strong. That last line of the article, just wow.

But I'm sooo glad it sounds like the institutional shareholders have gone into full revolt over this and are putting their feet down, even if far later than they should have, to reign in the manbaby and his sycophant board of directors

 

[s73v3r]

Something tells me you're not an old shareholder, because they overwhelmingly disagreed with you back in 2018.

And they were overwhelmingly lied to by Elon and the board.

 

[Dragonmaster Lou]

Agreed on both increasing marginal tax rates and also think that earned income, capital gains, and inheritance should be treated the same for tax purposes. And we should ditch the exemption for profits on sales of a home.

Taxing loaned money does not seem like a good idea to me. As if houses weren't expensive enough now, treating the mortgage as "income" in the year that the bank loans it to you would kill the ability of anyone to buy.

IMO, "loans aren't taxed because you don't get to keep the money" is a reasonable proposition.

Oh, I'm not talking about taxing loaned money per se. I'm talking about something to clamp down on the fact that people with enough stock to use it as collateral for massive loans can essentially use it to get expensive toys without paying tax on the income used to buy them. There's a big difference between a couple who saved every penny they could for ages to afford a down payment on a home vs. Joe Gigabucks taking out a loan against his stock to buy a new private jet without having to sell his stock and pay capital gains on it.

 

[Achillies]

What would happen to any other CEO that told the board to pay me 46B so I will pay attention to my job? Isn’t it the board’s job to make sure the CEO is actually doing something? Also, if Musk met all the requirements to be paid that much and he did it part time maybe the requirements weren’t high enoug.

 

[OrvGull]

Musk has them by the short and curlies here - I'd probably vote yes on the pay package. Most of the shares he'll receive won't get sold and Wall Street is going to stop giving Tesla the unicorn treatment if they shoot what Wall Street considers to be their unicorn. It's hard to look at his track record of turning Tesla and SpaceX into trillion dollar companies and not think he's got some legitimate skill as a CEO. If you're sitting behind a Bloomberg terminal you may well agree with many of the statements or business practices the average Arsian finds disturbing.

It's possible some of them will ask "what has he done for me lately," though. The stock peaked in 2021 and its been downhill ever since.

 

[Gigaflop]

I can't wait to see what excuse Musk and the board use when Tesla comes crashing down. It was "because of government heavy handed scrutiny" or "because of the leftwing fake news" but definitely not because of Musk the "greatest visionary of our time." He can do no wrong, it's everyone else's fault Tesla is failing. The Cybertruck is a perfect vehicle, just too far ahead of it's time.

(I say this as a shameful owner of a Tesla that I can't realistically afford to sell and buy another car)

 

[deadman12-4]

I always think that by focusing on dollar values, everyone is missing the point. This isn't about money. This is about cementing Musk's control of the company by giving him another 10% of the company shares. Musk isn't going to sell those shares any time soon (perhaps he might use them as collateral for borrowing a fraction of their value).

Also, Tesla seems wildly overvalued to me - not that I don't think there is ANY value in the company - of course there is, but. . . 500 Billion?

But the real questions to be asking aren't about money, it's about what does Musk plans to do once he has an additional 10% control of the company?

you don't need to sell shares to profit from them. Musk takes loans out against them (using them as collateral). Make no mistake, this is a gigantic payday for musk that he will profit from. The more shares he has, the better rates he gets on those loans. This is just as much about musk getting richer as it is about control.

 

[s73v3r]

Not a 2018 shareholder, are you?

The shareholders in 2018 were lied to, full fucking stop. This was found to be fact by the courts. This is not something you can disagree with.

 

[gosand]

Musk is worth something like $200 billion, most (if not all) of that from Tesla. He's already been amply rewarded for whatever vision he brought.

As of right now as I post this, it's $209 billion. https://www.forbes.com/real-time-billionaires/#7f04d8f73d78

I am not trying to be pedantic in this clarification, but want to illustrate the absurdity of this wealth.
This rounding error a 9 billion dollar difference. NINE BILLION DOLLARS. These mega-billionaires see their wealth fluctuate on a daily basis by 1000+ times more money that you or I will see in our lifetime. It's lunacy.

 

[Uragan]

Musk has them by the short and curlies here - I'd probably vote yes on the pay package.

So you're okay with being lied to and extorted by a CEO and a captive Board of Directors?

Most of the shares he'll receive won't get sold...

How do you know this? Are you friends with him?

Wall Street is going to stop giving Tesla the unicorn treatment if they shoot what Wall Street considers to be their unicorn.

What is the point of this? Of course if Wall Street stops treating Tesla irrationally, Tesla's stock will go down.

It's hard to look at his track record of turning Tesla and SpaceX into trillion dollar companies and not think he's got some legitimate skill as a CEO.

I mean, considering Tesla's stock price is down 30% YTD and down 60% from its all-time high... that's not a good sign of "legitimate skill as a CEO".

If Mother Theresa had founded Apple, invented powered flight, been reigning UFC heavyweight champ since the inception of the sport, and had a billion dollars I don't think that there's any particular reason she would deserve a second billion dollars.

So why does Musk deserve $56 billion for less?

 

[AmanoJyaku]

But the idiot fans - like the one cited in the FT article - would not buy the stock anymore, and the big investors would loose tens of billions of dollars as the valuation of Tesla comes back to the real world. And I assume that that's why the big investors back the ridiculous pay day. They don't care about the company; they care about their profits

Funny, the big investors are the most vocal in opposing this. In fact, I can't think of a big investor supporting this:

Elon Musk sees another big advisory firm come out against his multibillion dollar pay package

ISS said in its recommendations on Tesla’s proxy voting items that Musk’s stock-based package was outsized when it was approved by shareholders in 2018, and it failed to accomplish board objectives voiced at that time.

The firm said that Tesla met the pay package’s performance objectives, and it recognized the company’s substantial growth in size and profitability. But concerns about Musk spending too much time on other ventures that were raised in 2018 and since then have not been sufficiently addressed, ISS said.

“The grant, in many ways, failed to achieve the board’s other original objectives of focusing CEO Musk on the interests of Tesla shareholders, as opposed to other business endeavors, and aligning his financial interests more closely with those of Tesla stockholders,” ISS wrote.

Last week the other prominent proxy advisory firm, Glass Lewis, also recommended against reinstating Musk’s 2018 compensation package. The firm said the package would dilute shareholders’ value by about 8.7%. The rationale for the package “does not in our view adequately consider dilution and its long-lasting effects on disinterested shareholders,” Glass Lewis wrote.

Norwegian wealth fund to vote against Elon Musk’s Tesla pay package

“While we appreciate the significant value generated under Mr. Musk’s leadership since the grant date in 2018, we remain concerned about the total size of the award, the structure given performance triggers, dilution, and lack of mitigation of key person risk,” Norges Bank Investment Management said in a statement on its website. “We will continue to seek constructive dialogue with Tesla on this and other topics.”

 

[DarthSlack]

While I agree that there is no CEO that deserves 1 Billion US$ a year, and much less the $5 10e10 that Musk wants, maybe the payout is justified?
What keeps the price of Tesla stock (I refuse to call it value) up is not the actual, physical company,. It's the star appeal people see in Musk. He is the Kim Khardashian of CEOs - no talent, but loads of fans who adore him.
If he were to be kicked out, the physical company might do better in the very short as well as the long run. But the idiot fans - like the one cited in the FT article - would not buy the stock anymore, and the big investors would loose tens of billions of dollars as the valuation of Tesla comes back to the real world. And I assume that that's why the big investors back the ridiculous pay day. They don't care about the company; they care about their profits

For those wondering about the details behind the phrase "The stock market can remain irrational longer than you can remain solvent", this post nicely summarizes the irrational part.

 

[s73v3r]

I actually feel kind of conflicted.

When this package was suggested, he took a huge gamble

No, he didn't. The courts found that he and the board flat out lied about how difficult it would be. Why didn't you mention that in any of your tirade of bullshit?

 

[Snark218]

So you're okay with being lied to and extorted by a CEO and a captive Board of Directors?

He's so okay with that.

 

[IncorrigibleTroll]

He's so okay with that.

Well now you make it sound like we're kinkshaming the muskovites.

 

[s73v3r]

Everyone said at the time that the targets were near impossible to reach

And as it turns out, the board was lying. Why are you incapable of comprehending that?

 

[Uragan]

@Fit&NerdyFSUgirl, this should be right up your alley. Why don't you educate all of us on why Musk deserves his $56 billion payout since you voted for it?

 

[s73v3r]

Incredible. It's like people live in lala land and don't bother even reading, but still form an opinion that they don't feel ashamed sharing.

I know! How can you keep repeating the lie of the goals being "impossible" to reach when the courts themselves have stated that was bullshit, and the board knew it?

 

[DarthSlack]

It's stock, not cash. It doesn't directly cost Tesla anything. It's not money they could use to develop new vehicles, because it's not money they have.

But it does cost Tesla shareholders plenty. They're the ones directly funding this pay packet through dilution.

 

[daveishereagain]

"Successful visionary CEO" is not a thing, except for people who pretend not to recognize that the Tesla ship is permanently adrift; and helping Musk squeeze his cut out of the overinflated value of the company is the first step in allowing other the big whales to do the same.

Visionary. A hyped up FSD that doesn't FSD, no new family car in the works, a monstrosity of a ....that's a *truck? For HOW MUCH?, giving the heave-ho to two key departments that focus on company growth on a whim and then whimpering "Please come back.", "I need more money than GOD to be motivated. Pay me or I'll pretend we're in a new game called "Where's Elon?"
That 'visionary'?
The great CEO of our lifetime? The one that stiffs Twitters creditors, suppliers and rental/lease agreements? Stiffs former employees of their rightful compensation? Allows racism to run ramped on the shop floor? The 'visionary' who insists rules don't apply to him because it's him?
That 'visionary'? Yeah, his worshipers are having visions alright. However, over here in the Land of Plain View, we watch and say,"what the fuck are they smokin'?"

Edit-Sorry for the double post and sloppy wording. MORE COFFEE!

 

[daveishereagain]

Visionary. A hyped up FSD that doesn't FSD, no new family car in the works, a monstrosity of a ....that's a truck? For HOW MUCH?, giving the heave-ho to two key departments that focus on company growth on a whim and then whimpering "Please come back.", "I need more money than GOD to be motivated. Pay me or I'll pretend we're in a new game called "Where's Elon?"
That 'visionary'?
The great CEO of our lifetime? The one that stiffs Twitters creditors, suppliers and rental/lease agreements? Stiffs former employees of their rightful compensation? Allows racism to run ramped on the shop floor? The 'visionary' who insists rules don't apply to him because it's him?
That 'visionary'? Yeah, his worshipers are having visions alright. However, over here in the Land of Plain View, we watch and say,"what the fuck are they smokin'?"

 

[s73v3r]

Wow. Observing how many people on here allow their feelings about Musk personally and politically to overcome any form of logical reasoning is mind boggling.

I know! Here you are parroting a bunch of crap about how hard it was, when you know for a fact that it wasn't. Nowhere in your rant do you mention the fact that Musk and the board flat out lied to shareholders about how hard things were. The only way you could possibly do that is if you were to let your feelings about Musk cloud your judgement.

 

[daveishereagain]

I know! Here you are parroting a bunch of crap about how hard it was, when you know for a fact that it wasn't. Nowhere in your rant do you mention the fact that Musk and the board flat out lied to shareholders about how hard things were. The only way you could possibly do that is if you were to let your feelings about Musk cloud your judgement.

Hero worship causes blindness.