Posted on 01/31/2024 9:56:38 PM PST by SeekAndFind
The world’s richest man had a bad day in court this week. A judge in Delaware ruled that Elon Musk is ineligible to receive a compensation package from Tesla worth an estimated $55 billion. This is a case that has dragged out for five years and the merits of the arguments coming from both sides seem rather vague. The suit was originally brought by a group of shareholders who claim that Musk unfairly crafted his own compensation package resulting in “unjust enrichment” for the billionaire at the expense of the other shareholders. The judge apparently agreed, but Musk’s attorneys argue that the package was a fair one and they have all the receipts to prove it. (Associated Press)
A judge says Elon Musk must give up a compensation package awarded by Tesla’s board of directors that is potentially worth more than $55 billion.
The ruling in a Delaware court comes five years after a shareholder lawsuit targeted Tesla CEO Musk and the directors. They were accused of breaching their duties to the electric vehicle and solar panel manufacturer, resulting in a waste of corporate assets and unjust enrichment for Musk.
Plaintiff’s lawyers argued that the pay package was dictated by Musk and was the product of sham negotiations with directors who were not independent of him.
The compensation plan itself doesn’t appear to be the major sticking point in this case. It was filled with aggressive growth and performance milestones for Tesla to meet, with various levels of compensation going to Musk if they met them. Nearly all of the milestones wound up being met, so Musk appears to have held up his end of the deal. The plaintiffs are instead arguing that the deal was arrived at unfairly because Musk was running the show in the background.
Tesla soared under Musk’s ownership, outpacing the projections of most Wall Street analysts. Musk’s incentive package called for Tesla to grow to a valuation of at least $650 billion. It actually reached $800 billion and briefly went over a trillion earlier this year. Musk’s attorneys argue that all of the shareholders similarly benefitted from the company’s stellar growth, seeing growth in their own portfolios and additional payments.
But the underlying question is whether or not the board developed the compensation package independently or if Musk held too much influence over them in determining how much he would eventually receive. The plaintiffs claim that was the case, but whatever influence Musk had must have been indirect at best. The judge claims that Elon had a “long personal and business relationship” with committee chairman Ira Ehrenpreis. Another member of the committee had been Musk’s divorce lawyer. So he knew them, but none of them actually worked for or reported to him.
It makes perfect sense that Elon Musk would have wanted to work out the best possible deal for himself that he could. He’s a capitalist, after all. But in the end, none of them were forced to agree to the deal. Musk only owned 13% of the shares of Tesla at the time, so he couldn’t override the other shareholders either. This sounds like a case of people believing that Musk had made “too much money” and they wanted a bigger slice of the pie. At one point they even refer to Musk’s “absurdly outsized pay package.”
But Tesla made an absurd amount of money. What else did they expect would happen? And none of this addresses the idea that the courts can simply reach into the past and dip into the pockets of private entrepreneurs and relieve them of their wealth. The whole situation seems absurd.
The suit was originally brought by a group of shareholders who claim that Musk unfairly crafted his own compensation package resulting in “unjust enrichment” for the billionaire at the expense of the other shareholders.
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The judge should throw this out.
It looks like a small group of shareholders want extra compensation beyond the other shareholders.
The most disgusting thing about this case is that in the end Musk so outperformed the original goals that prompted this compensation package that the board will simply vote a new package for him. Unfortunately, because of the judges ruling, the class action attorneys will be awarded $5 billion which will be taken from Tesla shareholders. This is legalized criminality courtesy of our corrupt legal system.
I like Elon Musk. I wish he could run for President but I know he’s foreign born. I wish him all the success in the world.
We’re turning into a communist country. How much Tesla’s CEO is paid is nobody’s business but the owners’. And the fact that Musk is an important political figure in the opposition makes it even more outrageous.
The owners of Tesla (the shareholders) approved the compensation package by a wide margin. And shareholders still feel that way; we know that they disapprove of the court’s decision because TSLA stock dropped by 3% when the judge’s ruling was announced.
Originally, the pay plan was widely viewed as a publicity stunt, because the amount Tesla would have to grow for Musk to collect was seen as ridiculously high to the point of impossibility.
But Tesla’s performance was outstanding beyond one’s wildest dreams. They had a contract. And Musk is entitled to his pay.
Oh, and the guy who sued has 9 shares of stock. How can the judge possibly consider him a representative of general shareholders?
Our judicial system sinks to a new depth every day, it seems.
So how are all the shareholders doing? Making tons of $$$$$?
If so, this is a total crock.
Musk's compensation package was put before a judge and found wanting.
If injustice was done, then Musk can appeal.
There are those who believe that the ENRON folks technically and legally did nothing wrong. Most people believe what they did was immoral, but that's not for the law to decide.
We should have a vote between the Musk fan boys and the Musk haters to see whether or not Musk should keep his compensation. If he can garner the support of Taylor Swift, then I'm sure he'll win in a landslide.
So how are all the shareholders doing? Making tons of $$$$$?
If so, this is a total crock.
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I invest in Musk , and don’t appreciate the selfishness of this group.
However, this stuff happens in business and we’ll just have to move forward.
Bingo.
Enron failed due in part to Andrew Weissmann.
Who is John Galt?
What does he do for the left? Could he be a Mark Cuban?
Ayn Rand has been ridiculed for years (as have Ayn Rand fans), but she was right.
I hope you don't mind my improvment of your on-point post.
This is how Fascism (Italo-German model) works.
“You can keep title to your business, but we’ll tell you how to run it”.
Ayn Rand has been ridiculed for years (as have Ayn Rand fans), but she was right.
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What did she say about Musk & the unnamed group of shareholders?
bttt
Not a problem, other than more legal expense for the brass at Tesla.
For their stated plan of distribution to pass muster, they will consider relocating the incorporation of Tesla.
Bye, to the State of Deleware.
“Deleware” - > Delaware
Obviously, since Ayn Rand died in 1983 , she could say nothing. However I do believe this quote fits:
When you see that in order to produce, you need to obtain permission from men who produce nothing - When you see that money is flowing to those who deal, not in goods, but in favors - When you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you - When you see corruption being rewarded and honesty becoming a self-sacrifice - You may know that your society is doomed.
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