This is a summary. https://www.gibsondunn.com/wp-content/uploads/2024/02/delaware-chancery-court-invalidates-elon-musk-55.8-billion-equity-compensation-package.pdf The short of it. the Court decided the shareholders weren't fully informed for the vote. The proxy called some board members independent of Musk when they weren't, and it left details out about process used to approve the package. The package also didn't use traditional benchmarking analysis. The board may have been basing the amount on Musk's plans outside of Tesla.
A TSLA stock holder in 2018, I voted for the plan. Kathaleen McCormick just invalidated my vote without hearing from me: I was well aware of the close personal and business ties of Musk family and friends on the Board of Directors. After all, we voted on who would be on the board ... every stock holder including Elon. It is what happens when a small company barely afloat is trying to compensate 'the key employee' for the extraordinary efforts taken to make the company survive. Application of 'hindsight' heuristics is vile. It means my taking a chance on Tesla was wrong because it worked. Only because it worked did the 'Grant' have value. The value came from and continues from new TSLA stock buyers who freely bid up the stock price. Bob Wilson
We all knew what we were voting for with our stock. The payout would require Tesla's extreme success. Our ownership value has more than tripled during the past 4+ years & so it met all conditions for musk's payout. It's so stupid when someone owning stock says I was Dumb & didn't realize what my proxy vote was doing or what my personal vote was not doing. .
Since some don't seem to at least check the summary. The “extraordinary nature of the Grant”[10] In addition to the process of approving the Grant, the Court considered its “price.” “The Board never asked the $55.8 billion question: Was the plan even necessary for Tesla to retain Musk and achieve its goals?”[11] The Court concluded that it was not for three key reasons: • Musk already owned 21.9% of Tesla, which ownership stake gave him incentive to push Tesla to grow its market capitalization even without the additional compensation; • there was no risk that Musk would depart Tesla without receiving the Grant, nor did the Board condition the package on Musk devoting any set amount of time to Tesla; and • the Grant’s performance conditions were not, in fact, ambitious and difficult to achieve.[12] It was also significant to the Court that the Grant process lacked a traditional benchmarking analysis.[13] “The incredible size of the biggest compensation plan ever—an unfathomable sum—seems to have been calibrated to help Musk achieve what he believed would make “a good future for humanity” [related to Musk’s goal of colonizing Mars]. …. [T]hat had no relation to Tesla’s goals with the compensation plan.”[14]
Since some don't seem to at least check the summary. Thank you! I didn’t realize what my lying eyes saw. If I wanted my 401k to stay in loser stocks, I would have asked you or the ‘judge’ to be my dictatorial guardian. Bob Wilson
Their money bought their stock, their vote. My money bought my stock, my vote. It was presumptuous to presume we stock holders didn't know enough to vote and the close association of a Board of Directors and the CEO. Bob Wilson
True. Similar to folks that vote for Congress, & presidential elections strictly on party lines. But do we then try to overturn the elections? .
To be fair, if the prospectus stated information that was wrong, it is no longer presumptuous. That said, this stock holder was aware of the ‘tight knit’ nature of the BOD and did not agree that those goals were ‘easy’ to reach.
Even more than that, people that bought stock several years ago, likely understood the company was on very shaky ground, possibility of failure. With government intervention more prevalent now - maybe companies should never fail? Should we be reimbursed for several stock failures as well as a retune successful ones? Looks like we need to put those goal posts on casters .
You or others being aware does not negate the board's responsibility in declaring such in the proxy statement for the vote. Not a like comparison. Share holders don't get one person one vote. These are different systems. Some corporate bylaws allow the board to override shareholder votes. His knowing that proxy declaring board members independent of Musk when they weren't might have been the reason why he saw the need to file a suite.
The proper remedy would be a 'recount'. Since we don't have time machines, yet, just rerun the 2018 vote using the the judge's decision as a reference. When we vote for the retroactive compensation plan, problem solved. Only this time, add Musks desire for 25% voting rights on his stock, a two tiered stock plan like: Common Preferred Problem solved. Bob Wilson
Perhaps that will happen. This decision vacated the package. It does not dictate that Musk doesn't get paid. The payment being negotiated by both sides attorneys is for Musk.
The Musk should ask for what he would have gotten if he'd failed, $0.00. And make that the attorney's fee. Hold out until the Judge has to step in and decide. Meanwhile, I suspect Musk gets to keep what he got. Bob Wilson
I can’t wait to find out how much the drummer and his legal team get. Meanwhile, my small investment is up $200.
