[leetgirl83]

I encourage everyone to read the official filing of the compensation package in 2018 and decide if it is misleading to the investors.

https://www.sec.gov/Archives/edgar/data/1318605/000119312518...

In particular, this part:

The Compensation Committee has overall responsibility for recommending to our Board the compensation of our Chief Executive Officer and determining the compensation of our other executive officers. Members of the Compensation Committee are appointed by our Board. Currently, the Compensation Committee consists of four members of our Board: Brad Buss, Robyn Denholm, Ira Ehrenpreis and Antonio Gracias, none of whom is an executive officer of Tesla, and each of whom qualifies as (i) an “independent director” under the NASDAQ Stock Market Rules and (ii) an “outside director” under Code Section 162(m).

[1vuio0pswjnm7]

Indeed her decision rests on that finding.

But according to the opinion, the issue was not what was included in the proxy statement, but what was left out. For example, details about those directors and their relationship with the CEO. Was that intentional?

Call me crazy, but having the CEO's divorce lawyer as the General Counsel is impossible to ignore as a potential red flag. Why. There are only so many reasons he would be given the job and most of them are problematic. Was he in charge of preparing this proxy statement.

[alecco]

https://en.wikipedia.org/wiki/Kathaleen_McCormick

Interesting context. (Note: I'm not from USA)

[YeBanKo]

Did it have a material change on the outcome of the vote? Even if the committee was designated as not independent and fully biased, the board went alone with it and the shareholder approved. The deal was clear – Tesla hits very ambitious goals, Musk gets crazy amount of money. The fact that a judge can come in and completely reverse such a decision is mind blowing and seems more like a judicial activism.

[Fluorescence]

It's a public company, not Musk's piggybank. This is a common fraud of senior management with too much control. The CEO, major shareholders and the board cannot tunnel assets out of a business due to improper relationships and defraud minor shareholders.

Note that board has always been given compensation way out of line with any business ever before and it has been notably spineless through Musk's fraud convictions, impregnation of co-workers, pedo-gate abuse, open racism, drug use, erratic behaviour and that he is clearly absent from the business from the business 80%+ of the time and the product pipeline has been dead for years.

The man already owned a ton of shares which gave him huge upside on success aka "incentive" and said he wasn't leaving so what were the shareholders paying for? The board had a fiduciary duty to negotiate the best deal and instead they gave him what he asked for - a package many orders of magnitude greater than any CEO compensation ever before. What would the no. 2 CEO pick have cost?

No small issue is that we will likely see how temporary these "achievements" are as Tesla will, someday, be priced like a car company and Tesla's books have had red flags over them for a decade.

[rchaud]

> The fact that a judge can come in and completely reverse such a decision is mind blowing and seems more like a judicial activism.

A shareholder filed a lawsuit, it went to the courts, a judge ruled on it. What's the issue?

What recourse does a minority investor have if the BoD, which is supposed to represent shareholder interests, is full of CEO loyalists agreeing to cartoonishly large bonuses?

[YeBanKo]

They did represent the shareholder interest. This compensation deal delivered a crazy increase in company valuation. Tesla went from selling 200k vehicles to selling over 1M.

[aw1621107]

Given how much control Musk exerted over the process it's less that the board represented shareholder interests and more that the shareholders happened to benefit despite not being represented and not being fully informed on how the compensation package was put together. Perhaps a subtle distinction, but important in the eyes of the law.

[aw1621107]

> Did it have a material change on the outcome of the vote?

Potentially, yes. Stockholders did complain about the proposed grant even with their incomplete information; who knows what they might have said if the disclosure were more complete. From the opinion:

> The two largest proxy advisors, ISS and Glass Lewis, both recommended voting against the 2018 Grant.

> [Specific details about the objections from ISS/Glass Lewis]

> Stockholders also criticized the Grant, noting that Musk’s Tesla equity provided sufficient motivation for Musk to perform, the Grant’s size and dilutive effects were excessive, the EBITDA milestones were too low, and that linear milestones were inappropriate for an “exponential company” like Tesla.

If the stockholders knew that the directors were not independent and/or that there wasn't a substantial negotiation and/or that (some of?) the planned targets were not that ambitious, then they may reasonably say no to the grant.

> the board went alon[g] with it

The board was not independent. There were nine directors on the board, but one left early, so that leaves 8. Elon is one and his brother another. Antonio Gracias and James Murdoch have close personal ties to Elon, and the former is also very heavily invested in Elon's businesses. Ira Ehrenpreis also has a "weighty" relationship with Elon and is also invested in Elon and Kimball's business ventures other than Tesla, though not to the same extent as Gracias.

The first 3 (Kimball, Gracias, and Murdoch) were determined to lack independence from Musk due to their close personal relatioship - 4 out of 8, and that doesn't include Ehrenpreis' personal ties.

In addition, the judge found that the board didn't act independently either. Some of the members themselves testified that they were working together with Musk during the negotiations - hardly a sign of acting independently of their personal ties.

> and the shareholder approved

That was determined to be irrelevant due to Tesla making material omissions in the proxy statement before the vote.

> The fact that a judge can come in and completely reverse such a decision is mind blowing and seems more like a judicial activism.

That's the law. If you break the rules it's not unreasonable to be prevented from reaping the rewards of doing so.

[YeBanKo]

The plan targets not that ambitious? $60B to $650B to get the full package in how many years? If the committee was his mom and his brother %79 would have voted yes. One very small shareholder and a judge with bias overrule the majority of shareholder, trying to wrap it into a legal argument.

[aw1621107]

> The plan targets not that ambitious?

Some of them, at the very least. If you were projecting that you were going to meet some of the milestones before offering the compensation plan and tell your investors that you project that you have a >=70% chance of meeting some of the milestones a few months after offering the grant, then I think it's reasonable to claim that at least some of the milestones were not that ambitious.

Some of the shareholders made similar criticisms, even without knowing about the internal projections.

> One very small shareholder and a judge with bias overrule the majority of shareholder

The shareholder vote was not fully informed, so it counts for little in these types of matters. Shareholder size also doesn't matter - they're all equal under the eyes of the law. Might doesn't make right.

I'm also curious - why do you think the judge is biased?

[hackerlight]

It doesn't matter. You can't get your compensation package set by your friends in a public company and then say it was okay just because the company did well. Agents are supposed to represent the shareholders' interests.

[YeBanKo]

They did. Board approved, shareholders approved, the company hit the milestones.

[hackerlight]

> Board approved, shareholders approved

All covered in the judgement. Shareholders can't act in their best interests if they don't know that the advice they're getting is a product of conflict of interests instead of a genuine independent recommendation.

> the company hit the milestones.

Irrelevant since we don't know if the company would have hit those milestones regardless. The ruling covers this, in her judgement Elon had sufficient motivation with existing equity that the pay package was unnecessary from the interests of shareholders.

[ModernMech]

Musk lied to the shareholders to secure those votes. It doesn’t matter what they voted when fraud is involved. That’s why a judge gets to decide.

Enforcing the law is not “judicial activism”

[gamblor956]

Buss was the CFO of SolarCity, which Tesla acquired, and Ehrenpreis was friends with Musk at Stanford. As an employee, Buss is by definition not an independent director, see NASDAQ SMR 5605(2)(B).

[nocoiner]

Oh, excellent catch - agreed, Gracias, Buss, and probably Ehrenpreis and perhaps Denholm are, at best, questionably independent (and for a couple of them quite clearly not independent).

Also agreed that this is the crux of the reasons why the pay package was so problematic.

[melling]

Remember when you said Meta wasn’t a good buy?

“ Why is that an incredible investment opportunity? Something like ~53% of the voting power is owned or controlled by Zuck, and there’s no indication that he has any plans to meaningfully return money to shareholders,* rather than continuing to write ten-digit company checks every month to fund the metaverse. If you want to buy META as a bet on Zuck himself or the success of their conception of the metaverse, that’s one thing, but I don’t see how this is a reasonable value investment based on their current management and capital structure. * I know Meta has done stock buy-backs from time to time, which are of course economically equivalent to a dividend (except more tax efficient), but from eyeballing their history of repurchases, it looks like they, like many issuers, managed to set billions of dollars of shareholder money on fire by repurchasing the stock while it was trading at rich multiples.”

[nocoiner]

There is definitely a reason why I post that junk to the internet and don’t try to make a living making investment decisions.

[melling]

Why post junk at all? I’m here to learn.