Elon Musk will move Tesla's incorporation to Texas following $56 billion ruling, tops...

[Plutoisaplanet]

The problem is how the contract was drafted, presented to the shareholders and voted. The real projected growth of the company was hidden and shareholders were lied to about how fast Musk would qualify for the maximum amount. This resulted in a package that is around six times larger than the "combined pay of the 200 highest-paid executives in 2021".

Shareholders were not lied to. The compensation package was based on tracking two criteria of performance: operational metrics and market capitalization. I don't see how there's any confusion on how "fast" he could be paid. Full compensation only comes via stock options once Tesla hits $650B+ market capitalization for at least 6 months, once Tesla achieves $75B - $175B annual revenue and $6B - $14B annual EBITDA. As a shareholder, I'm upset about these developments and I don't understand why a judge has the power to overrule my vote.

Here is the actual announcement: https://ir.tesla.com/press-release/tesla-announces-new-long-term-performance-award-elon-musk

You and the media also didn't mention that 56 billion compensation package is equal to about 7 year's worth of profits combined for Tesla, and Tesla doesn't even make a profit every year.

This huge growth in share values was primarily driven by new investment money, not by a traditional evaluation of profit ratios.

No it's not just based on the growth of investment money, and yes there was a requirement to have a traditional evaluation of profit before he could get paid. The EBITDA and revenue requirements were separate from the market capitalization requirement, making this impossible to game. In addition, Tesla did not have to pay anywhere near that sum of money to grant Elon Musk the "$56 billion" because it was 1. stock options 2. a fluctuating value 3. is still mostly vested in Tesla.

As a performance metric, EBITDA has been around for about 50 years and is used commonly by companies and investors alike.

EBITDA, or earnings before interest, taxes, depreciation, and amortization, is an alternate measure of profitability to net income. By including depreciation and amortization as well as taxes and debt payment costs, EBITDA attempts to represent the cash profit generated by the company's operations.

https://www.investopedia.com/terms/e/ebitda.asp

 

[Alfonso Maruccia]

This is the funniest timeline ever, really. I'm from Italy, and I voted for Musk to move to Texas. Isn't plutocratic technocracy beautiful? :-D

 

[Endymio]

Present actual objective data instead of making unsubstantiated claims and being snarky.

Did you not read? I presented actual data: the judge's own stated reasoning behind this ruling, and why it's legally flawed. Go back and read it, then check in with the rest of us.

publicly traded companies do have rules to follow. The judge didn't have some grudge, she determined the rules were not followed in this case. He did (technically) have the choice of keeping Tesla private

Again -- this has absolutely nothing to do with Tesla being public. Were it a private corporation incorporated in Delaware, the exact same suit could have been brought.

And the judge did not determine that "some rule" was broken. She stated her opinion that, because Musk was himself a shareholder, he would have been equally motivated as CEO without a bonus package.

Do you know what Lisa Su's compensation is? In 2022, she was paid 1.1 million in salary and about 29 million in stocks

Several problems with this absurd comparison. First, Su receives 1.1 million a year even if the company loses money. She choose a guaranteed income in exchange for less upside potential Musk, however, agreed to zero salary. If he didn't at least double the company's value, he'd earn nothing.

Secondly and far more importantly, Since Nov 2021 to today, AMD's stock price has grown only from $158 to $170. If we go back a full 3 years, it went from $91 to $170, an inflation-adjusted rise of 60%. Over a similar three-year period, Musk increased Tesla's share price by 1200%. I'm sure even the most math-challenged individual here can see the difference in those two figures.

I ask again: what other CEO today -- or in all human history -- made their shareholders a 1200% return on investment in three years?

 

[Endymio]

One less reason to consider owning a Tesla.

Anyone who chooses their vehicle based on the pay package of the company CEO is already beyond all rational thought.

 

[Beerfloat]

Anyone who chooses their vehicle based on the pay package of the company CEO is already beyond all rational thought.

If you say so. Though the pay package is probably the least of my concerns with this repugnant individual.

 

[Bluescreendeath]

Several problems with this absurd comparison. First, Su receives 1.1 million a year even if the company loses money. She choose a guaranteed income in exchange for less upside potential Musk, however, agreed to zero salary. If he didn't at least double the company's value, he'd earn nothing.

Secondly and far more importantly, Since Nov 2021 to today, AMD's stock price has grown only from $158 to $170. If we go back a full 3 years, it went from $91 to $170, an inflation-adjusted rise of 60%. Over a similar three-year period, Musk increased Tesla's share price by 1200%. I'm sure even the most math-challenged individual here can see the difference in those two figures.

I ask again: what other CEO today -- or in all human history -- made their shareholders a 1200% return on investment in three years?

Several problems with this absurd comparison of salaries. Musk was already extremely rich so he never needed a guaranteed salary while at Tesla. Musk got a fifth of a billion dollars from cofounding Paypal and selling his shares. That Paypal money is what allowed him to invest in and buy Tesla in the first place. So Musk took zero dollars as salary because he could - he was already rich and could risk not having any salary and have his entire compensation as stock. That is what Steve Jobs did too. Big name rich Hollywood actors also often give up their salary in return for a bigger % of profits - while less rich actors can't do that.

Lisa Su on the other hand actually needed a guaranteed salary in the beginning because she wasn't already extremely rich. That 1 million in guaranteed salary that Lisa Su got is basically NOTHING to Musk when Musk was already worth 200+ million dollars when he got involved with Tesla. Lisa Su did equal or more than Musk in growing her company with a far lower stock compensation too.

And again, what Lisa Su did with AMD is comparable if not better than what Musk did in terms of growing stock value. AMD stock in the beginning of 2016 was around $2-ish per share. This reached $20ish a share at the beginning of 2019. That equals a 1000% return in 3 years.

But why are we even using this 3 year limitation? Tesla went public back in 2010, not 3 years ago. If we look at 2015 to now, then Lisa Su is superior in growing her company AMD.

In 2015, AMD was worth about $2-ish per share, was bleeding money, had no investors bailing it out, and was on the verge of bankruptcy. Today it is worth $170 per share. That is a growth of ~8,500% in 9 years.

Tesla was worth 14ish per share in 2015. Today it is worth $188 per share. That is a growth of ~1,340% in 9 years.

So Lisa Su grew AMD by ~8,500% in 9 years, which is more than 6x the growth of Musk growing Tesla by ~1,340% in 9 years.

So if you want to continue using the 3 year metric, then it is my turn to ask you: What other CEO today -- or in all human history -- made their shareholders a 8500% return on investment within nine years?

 

[Che Cazzo]

So, the genius is moving to a third world country called Texas.

It would be perfect for him, as long he stays from the weekly exploding chemical plants, because, hey, safety regulations are bad. for business.

 

[Che Cazzo]

Many businesses have been leaving the communist California.

You should read the article before throwing false responses around: This was in Delaware!!

 

[MyIOnU]

You should read the article before throwing false responses around: This was in Delaware!!

Oh right. They moved their headquarter from communist California to Texas a while ago. Now they move their incorporation from another communist blue State to Texas.

 

[Endymio]

.Musk was already extremely rich so he never needed a guaranteed salary while at Tesla.

ROFL, what? So you believe that people should work for free ... if "they already have plenty of money"? Sorry, but there's no arguing with a medieval mentality like this...

But why are we even using this 3 year limitation? Tesla went public back in 2010,

We're using this three-year period because this is the time period in question. Musk signed the pay package in 2018, and met the final tranche in 2021. Any more questions?

In 2015, AMD was worth about $2-ish per share, was bleeding money, had no investors bailing it out, and was on the verge of bankruptcy. Today it is worth $170 per share. That is a growth of ~8,500% in 9 years.

Oops! It was $2.80/share the day Lisa Su took the reins. Ignoring the fact that it had been selling as high as $40 before that, it gives Su's total growth at 6,070%. When Musk first assumed Tesla's CEO role, the company was private, and worth approximately $10M. Compared to Tesla's highest market cap of 1.4 trillion, that's a total growth of 14,000,000%.

Fourteen million percent.

Care to try again?

 

[cristianm]

And again, what Lisa Su did with AMD is comparable if not better than what Musk did in terms of growing stock value. AMD stock in the beginning of 2016 was around $2-ish per share. This reached $20ish a share at the beginning of 2019. That equals a 1000% return in 3 years.

Share price might be a bit misleading because in the meantime there could have been a split. I think it would be better to compare market cap. I believe both companies are overrated, TESLA can't perform the same as it did in the past because it started to get some serious competition while AMD doesn't show signs it can capitalize on the AI craze so the recent spike in the stock price will probably pass in a few quarters. Selling GPUs for $50k will not last long. Even so, both CEOs have their merits: Lista maybe saved AMD, Elon pushed the electrification of cars which might not save the earth but makes city air cleaner.

 

[OortCloud]

Many businesses have been leaving the communist California.

If there's a nonsense conspiracy theory for social misfits to get behind you will be always first in the line.

 

[coopbill]

You must admit it's a good get out for his self driving car nonsense. By now he must have gleaned from the engineers that GAI, and therefore self driving is a myth; but there was no way he could admit that he knows nothing about computer science, and that it's never going to happen.

 

[ZedRM]

A few facts the media's failed to report about this story.

1. This was a 10-year pay package, not a single year, or even four years.
2. Musk's salary for that 10-year period was zero dollars. He wouldn't receive a single penny, unless he doubled the company's value. In fact, he raised it by 1200% in just 3 years.
3. The judge based her ruling on faulty law: that while the pay package was legal, since Musk was "also a large shareholder", he would have devoted his best efforts to the company regardless of pay. Under corporate law, the relationship between a shareholder and executive is strictly incidental, and one should not affect the other. At any point in that 10-year period, Musk could have legally sold his Tesla stake, and then been a CEO with no interest in company performance, other than his compensation package.

Well said. At the end of the day, that Judge was wrong. The contract Tesla had with it's primary founder was valid and enforceable regardless of the insipid and mentally bereft ramblings of a shareholder. Tesla owes it's founder 55billion dollars and that debt will be paid once the HQ is moved to Texas.

Delaware needs to remind it's Judges their place in the great scheme of things.

 

[Bluescreendeath]

ROFL, what? So you believe that people should work for free ... if "they already have plenty of money"? Sorry, but there's no arguing with a medieval mentality like this...


We're using this three-year period because this is the time period in question. Musk signed the pay package in 2018, and met the final tranche in 2021. Any more questions?


Oops! It was $2.80/share the day Lisa Su took the reins. Ignoring the fact that it had been selling as high as $40 before that, it gives Su's total growth at 6,070%. When Musk first assumed Tesla's CEO role, the company was private, and worth approximately $10M. Compared to Tesla's highest market cap of 1.4 trillion, that's a total growth of 14,000,000%.

Fourteen million percent.

Care to try again?

First, don't strawman me with your false accusations. I never claimed Musk should work for free. I said he was rich enough to forgo a small stable salary in exchange for potentially more - billions in stock compensation - that is called PAYMENT.
Musk had billions in stock rewards - that means he is not working for free (and the judge never said he doesn't get anything, only that it should be renegotiated).
Lisa Su's compensation is 1 million in salary and 29 million in stocks. By your ridiculous logic that stock doesn't count as money, Lisa Su would be working for free if she didn't have a guaranteed salary despite her 29 million in stocks? So Musk doesn't have compensation despite the fact he will get billions in stocks? Don't give me that absurd crap.

And nobody is saying Musk doesn't deserve stocks as compensation. The entire problem was how the stock compensation was negotiated (ie. specifically NOT negotiated when it was supposed to).

Two, why would you compare private evaluations with public evaluations? That is ridiculous. Public companies get massive influx of investor money from the general public, retirement funds, governments, etc. while private companies could be nearly worthless when first starting out.

For example, Jeff Bezos founded Amazon as a nearly worthless PRIVATE company in his garage selling books - his company was worth a few thousand dollars at best when starting out in 1994. It is worth 1.8 TRILLION in market cap today. By your logic, if we assume Amazon was worth 100k in 1994, then Bezos actually grew Amazon's worth by something like 1,800,000,000% - ONE BILLION EIGHT HUNDRED MILLION PERCENT.

If you want to use that logic, then that means Bezos beats Musk by 129x (12,900%).

And Musk and Bezos both had the great luck of mostly not having any competition in their industries for the longest time.

So care to try again?

Third, this entire case was about how the pay was not properly negotiated, not whether Musk deserved billions in stocks for his performance. Of course he deserved billions in stocks. He probably would not have gotten THAT much in stock if his compensation was actually negotiated properly (which Musk himself admitted it wasn't negotiated and the board basically just said yes to whatever he wanted).

Tesla violating Delaware corporate laws regarding board independence and/or negotiated salaries is the main point of this entire discussion...not whether you think Musk is the greatest genius CEO on the face of the planet in all of human history.

 

[Bluescreendeath]

Share price might be a bit misleading because in the meantime there could have been a split. I think it would be better to compare market cap. I believe both companies are overrated, TESLA can't perform the same as it did in the past because it started to get some serious competition while AMD doesn't show signs it can capitalize on the AI craze so the recent spike in the stock price will probably pass in a few quarters. Selling GPUs for $50k will not last long. Even so, both CEOs have their merits: Lista maybe saved AMD, Elon pushed the electrification of cars which might not save the earth but makes city air cleaner.

I agree. I just brought up AMD and Lisa Su because the other guy was saying or implying:

1. the state laws regarding board independence and/or C-suite compensation negotiations doesn't matter and can be ignored simply if the CEO does a good job at increasing the market share of a company, and

2. that Musk was somehow completely unique in human history and only he could increase shareholder values by a thousand percent with no other CEO capable of doing so.

 

[Endymio]

First, don't strawman me with your false accusations.

Your own words are clear. Musk was "already rich so he didn't need a salary." As for the stock rewards, this judge just took those from him, meaning that -- as of right now -- his ten-year pay package is zero.

By your logic, if we assume Amazon was worth 100k in 1994, then Bezos actually grew Amazon's worth by something like 1,800,000,000% - ONE BILLION EIGHT HUNDRED MILLION PERCENT.

Well, you certainly proved my point for me. Bezos became (for a while) the richest man on earth by earning tens of billions of dollars of stock options in his CEO role -- just the sort of pay you're advocating against. Whups!

Furthermore, your math is, unsurprisingly, utterly flawed. Amazon began with a few hundred thousand dollars from Bezos's parents, and most of its early growth came from multiple financing rounds. When a financier exchanges $100M in cash for $100M in equity, the book value of the company grows, but the existing investors don't make a dime.

 

[amghwk]

Musk topped another poll recently, though he's unlikely to be happy about it. Fortune's survey of most admired companies includes a section in which hundreds of CEOs were asked to rank their peers in terms of who is most overrated and who doesn't get enough credit.

Doesn't matter what his "peers" think. He's still the richest person on earth and such bickering is the norm from those who are unhappy with his wealth. And yes, we all know he's arrogant... but hey...money talks.

**shrugs**

 

[wiyosaya]

Well said. At the end of the day, that Judge was wrong. The contract Tesla had with it's primary founder was valid and enforceable regardless of the insipid and mentally bereft ramblings of a shareholder. Tesla owes it's founder 55billion dollars and that debt will be paid once the HQ is moved to Texas.

Delaware needs to remind it's Judges their place in the great scheme of things.

Its a well-known and verifiable public fact that Musk was not a primary founder of Tesla. Therefore, if Tesla owes its primary founder, $55billion, its not owed to Musk.

 

[wiyosaya]

2. that Musk was somehow completely unique in human history and only he could increase shareholder values by a thousand percent with no other CEO capable of doing so.

That's about like a certain person saying that only he can fix America which, anyone with any common sense would recognize as a complete load of BS. Certain people on this board also spout a complete load of BS because it sounds good and there are others gullible enough to swallow that BS like it was ice cream

Keep up the good work pointing out the loads of BS.

 

[wiyosaya]

Doesn't matter what his "peers" think. He's still the richest person on earth and such bickering is the norm from those who are unhappy with his wealth. And yes, we all know he's arrogant... but hey...money talks.

**shrugs**

Peers often have a way of seeing through the BS spouted by their peers. Perhaps those peers see something that others don't. Its hard to imagine, IMO, that given his behavior, others do not notice quirks that will result in excruciating migraines down the road. Then again, maybe he can implant himself with a neurallink to alleviate his lunacy.

 

[wiyosaya]

TESLA can't perform the same as it did in the past because it started to get some serious competition

And that competition is about to get much more intense. Tesla and their EVs just might become a distant aspect of history.

 

[Endymio]

Its a well-known and verifiable public fact that Musk was not a primary founder of Tesla. Therefore, if Tesla owes its primary founder, $55billion, its not owed to Musk.

Why is logic so difficult? Musk joined Tesla in 2005 a few months after their founding, when their only "product" was the drawing of a vehicle. He provided the initial "A round" financing, and then, three years later, when they'd only sold a half-dozen cars total (one to him) and were technically bankrupt, he took full control, plowed every remaining cent he had into the company, and radically changed its direction from intending to manufacture only a limited number of toys for the rich to a mass-production vehicle. All the innovations which made Tesla successful, from their giga stamping manufacture technique to their "gigafactory" self-produced batteries, came from Musk.

But none -- I repeat none -- of this is why Musk is due $56B. He's due because the company's owners signed a contract with him, obligating them to pay that amount, in exchange for him meeting certain performance metrics. Which he did.

 

[Bluescreendeath]

Your own words are clear. Musk was "already rich so he didn't need a salary." As for the stock rewards, this judge just took those from him, meaning that -- as of right now -- his ten-year pay package is zero.


Well, you certainly proved my point for me. Bezos became (for a while) the richest man on earth by earning tens of billions of dollars of stock options in his CEO role -- just the sort of pay you're advocating against. Whups!

Furthermore, your math is, unsurprisingly, utterly flawed. Amazon began with a few hundred thousand dollars from Bezos's parents, and most of its early growth came from multiple financing rounds. When a financier exchanges $100M in cash for $100M in equity, the book value of the company grows, but the existing investors don't make a dime.

What is clear is you don't understand the difference between the words "need" vs "deserve." Did you know that "need" and "deserve" are two different words with two completely different definitions?

Need's Oxford definition: "to require (something) because it is essential or very important."
Deserve's Oxford definition: "to do something or have or show qualities worthy of"

I said Musk doesn't need a small stable salary and thus can pick getting his compensation entirely from stock options - I never claimed he doesn't deserve any compensation (salary + stock) whatsoever. I literally said he deserved compensation, so you can stop strawmanning me.

If I am a rich & famous movie star, and a movie studio offers me $0 salary + 20% movie profits OR $100,000 salary + 0% of the movie gross, I would take $0 salary + 20% of the movie gross because I don't NEED the stable salary and can gamble on making more money by taking a percentage of the profits. On the other hand, if I am a broke new actor, I would take the salary because I actually NEED it because I can't take the risk of the movie failing and I get little to no profit as compensation. In both cases, I am still getting some form of compensation because I DESERVE compensation, but the levels of need for a stable salary vs stocks/profits/etc are different which allows different people to pick different compensation structures.

Do you get the difference now?

The judge is telling them to renegotiate his stock compensation, not that he doesn't deserve any stock compensation. He will still get his stock compensation - his ten year pay package is NOT zero. It is merely undetermined. If you are still negotiating with a new job for your salary, your salary is undetermined/TBD - not zero.

Furthermore, your math is, unsurprisingly, utterly flawed. Amazon began with a few hundred thousand dollars from Bezos's parents, and most of its early growth came from multiple financing rounds. When a financier exchanges $100M in cash for $100M in equity, the book value of the company grows, but the existing investors don't make a dime.

What is unsurprisingly flawed is your own lack of reflection in making that comment. What you described is similar to how Tesla went from a small private company to a huge publicly traded company, yet you had no problem claiming above that Tesla grew 14 million percent when it went from a small private company to a big publicly traded company.
I'm following YOUR own logic and playing your game here when I said Amazon grew by over a billion percent when it went from a small private company to a big publicly traded company.

If you don't like to win stupid prizes, then don't play stupid games.

Well, you certainly proved my point for me. Bezos became (for a while) the richest man on earth by earning tens of billions of dollars of stock options in his CEO role -- just the sort of pay you're advocating against. Whups!

Furthermore, your math is, unsurprisingly, utterly flawed. Amazon began with a few hundred thousand dollars from Bezos's parents, and most of its early growth came from multiple financing rounds. When a financier exchanges $100M in cash for $100M in equity, the book value of the company grows, but the existing investors don't make a dime.

Well, you certainly made it clear you STILL don't even understand what this case is about.
This case is NOT about whether billionaires deserve billions of dollars in stock compensation. I already said above that Musk (and Bezos) deserves billions in stocks as compensation.

This case is about Delaware corporate law requiring PUBLICLY TRADED company with public investors to have an independent board who can actually independently negotiate the CEO salary. Musk openly admitted that he controlled the board and his pay negotiations was "himself negotiation with himself."

Bezos didn't stack the entire board of Amazon with yes men who approved everything he told them (including his pay) without any negotiations or resistance.

Do you get it now? The problem was not about Musk getting compensation or the size of his compensation. The problem was always about how he negotiated his compensation by stacking the company with his yes men so there was never any negotiatons at all.

 

[Bluescreendeath]

Musk joined Tesla in 2005 a few months after their founding, when their only "product" was the drawing of a vehicle. He provided the initial "A round" financing, and then, three years later, when they'd only sold a half-dozen cars total (one to him) and were technically bankrupt, he took full control, plowed every remaining cent he had into the company, and radically changed its direction from intending to manufacture only a limited number of toys for the rich to a mass-production vehicle. All the innovations which made Tesla successful, from their giga stamping manufacture technique to their "gigafactory" self-produced batteries, came from Musk.

But none -- I repeat none -- of this is why Musk is due $56B. He's due because the company's owners signed a contract with him, obligating them to pay that amount, in exchange for him meeting certain performance metrics. Which he did.

Tesla was founded in 2003. They had product designs but needed investment money.
Musk did not join "a few months after their founding" if you're saying he joined in 2005. Are you talking about Musk's investment money in 2004?

If you say that Musk joining Tesla in 2005 and investing his money and significantly growing the company makes him a "primary founder," then would you consider businessman Ray Kroc to be a "primary founder" of McDonalds? The original founders of McDonalds (the McDonald brothers) only made McDonalds into a small, local hamburger chain with novel logistics while Ray Kroc invested his money, bought it, made it even more efficently run, and was the one who made the McDonalds chain global.

IIRC, Tesla had a lawsuit that said 5 people were allowed to call themselves cofounders of Tesla (one of them being Musk). I don't think it mentioned anything about a "primary" founder?

But none -- I repeat none -- of this is why Musk is due $56B. He's due because the company's owners signed a contract with him, obligating them to pay that amount, in exchange for him meeting certain performance metrics. Which he did.

You say he is owed the money because the company signed a contract with him.

Well, you can't sign a contract with yourself to have the publicly traded company that you run pay you whatever you want. Not all contracts are enforceable.

Delaware has legal requirements for publicly traded companies and their compensation contracts...independent board and have independent/actual negotiations with the CEO regarding compensation.

Musk openly admitted that the board was in his pocket and did whatever he told them to with his 'he was negotiating with himself' comment regarding compensation.

Musk is owed billion in stock compensation...he just needs to renegotiate the exact number with an independent board who doesn't just say yes to everything Musk asks.