What do you think about Elons Tesla compensation saga? \ stacker news ~econ

What do you think about Elons Tesla compensation saga?

4228 sats \ 13 comments \ @tomlaies 5 Feb econ

Here is the short summary of the situation

Elon owns between 10% and 15% of Tesla
He doesn't want to develop AI at Tesla without having 25% control of Tesla
The reason for this allegedly is that he only trusts himself to control AI to not go rogue

What happened:

The Tesla board agreed to 55 billion compensation for his job as CEO
A few shareholders sued
A court in Delaware (taxhaven where TSLA incorporated) agreed and shut the deal down
The given reason is that the board didn't negotiate. This is a bad look since TSLA already has a bad esGovernance rating for the board being full of Elons friends, family and henchmen.
Elon threatened to incorporate in Texas as a revenge and to get his compensation there

The numbers

Elon wants 55b
Teslas latest 4 revenue quaters were 97b revenue and 17.6b profit
Teslas total assets (not just bank account...) are 49b and 28b liabilities
Teslas market cap is just shy of 600b
Elons net worth is 193b as per Forbes (It's hard to say for sure since most of his companies are private and not publicly traded)

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445 sats \ 3 replies \ @tomlaies OP 5 Feb

My personal opinion:

The numbers are egregious. Getting a salary 2,5 years company profit to the point the companies balance sheet goes below zero
It's not a courts job to decide stuff like that

These 2 things don't contradict each other IMO. Both can be true at the same time.

We don't know how many shareholders sued in Delaware or how many would support it. There are no real votes of no confidence in the board in the US. But Tesla shareholders should still vote if this is in the best interest of shareholders.

0 sats \ 0 replies \ @Bell_curve 2 Mar

https://www.theguardian.com/technology/2024/mar/02/lawyers-who-had-elon-musks-pay-dismissed-as-excessive-seek-6bn-in-tesla-shares?ref=biztoc.com

0 sats \ 1 reply \ @kr 5 Feb

The numbers are egregious. Getting a salary 2,5 years company profit to the point the companies balance sheet goes below zero

the structure of the bonus is an important distinction here, i don’t think the headline number of $55 billion tells us the full story

1485 sats \ 0 replies \ @tomlaies OP 5 Feb

The whole point is voting rights allegedly. Sounds like Tesla will buyback and give him shares. Options or money would not get him those voting rights. New stock dilution would need shareholder approval

804 sats \ 2 replies \ @Bell_curve 5 Feb

The judge is a Biden ally

0 sats \ 1 reply \ @RepublicansSmellLikeTrumpsDiaper 6 Feb

deleted by author

0 sats \ 0 replies \ @Bell_curve 9 Feb

Great name

31 sats \ 2 replies \ @anon 6 Feb

regardless of Elon and his antics/nonsense the government (any of the 3 US branches) getting to decide how much someone is paid is insane

0 sats \ 1 reply \ @tomlaies OP 6 Feb

Agreed. But we don't know what 85%-90% of shareholders think about it either

0 sats \ 0 replies \ @Bell_curve 9 Feb

The decision is political. The left including the judge hates Elon because he isn’t woke

10 sats \ 1 reply \ @HardMoney 6 Feb

If you set wildly insane milestones that hit and make all existing shareholders a lot of value there really isn’t a place to retroactively decide “this is too much”. Most people in 2018 would have thought these milestones were impossible.

From chat gpt:

Elon Musk's compensation package, particularly the one approved by Tesla shareholders in 2018, is among the most notable in corporate history due to its size and structure, which are tied closely to the company's market capitalization and operational milestones. This package was designed not to give Musk any guaranteed salary or cash bonuses; instead, it provided him with the opportunity to earn stock options based on Tesla achieving certain financial and market capitalization milestones.

Here are the key components of the package:

Market Capitalization Milestones: The compensation plan included 12 market cap milestones, starting from $100 billion, with each subsequent milestone requiring an additional $50 billion in market valuation. For each milestone reached, Musk would earn stock options equivalent to 1% of outstanding shares at the time of the grant.
Operational Milestones: Alongside the market cap milestones, the package also set out 16 operational milestones related to revenue and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization). These targets were designed to ensure that the company was not just increasing in market value but also growing and becoming more profitable operationally.
Vesting Conditions: For Musk to vest any of the stock options, Tesla had to meet both a market cap milestone and an operational milestone. This dual-requirement structure ensured that Musk's interests were closely aligned with the long-term success and growth of the company.
Long-term Commitment: The plan required Musk to hold any vested shares for a minimum of five years after exercising the stock options, further tying his financial interests to the long-term performance of Tesla.

The intention behind this unprecedented compensation plan was to significantly reward Musk for driving Tesla to achieve ambitious and far-reaching goals, essentially betting on the company's success to generate personal financial gain. Critics of the plan pointed out its sheer size and potential cost to shareholders, while supporters argued that it was appropriately ambitious for a CEO who had drastically transformed the automotive and energy industries.

This plan was subject to approval by Tesla's shareholders and was seen as a bold move to secure Musk's leadership at Tesla while pushing the company towards unprecedented growth targets. Since the announcement of this compensation plan, Tesla has indeed reached several of the specified milestones, leading to substantial option vesting for Musk.

21 sats \ 0 replies \ @anon 6 Feb

Important to remember 100% of people not named Elon Musk said these were impossible and that shareholders made MASSIVE profits even accounting for the dilution caused by this compensation plan, e.g. as a shareholder you still won bigly time

0 sats \ 0 replies \ @kr 5 Feb

Elon has a lot of leverage here, I think he’ll get roughly what he wants.

I haven’t dug into the exact compensation structure, can you share the performance targets that must be reached before the compensation is triggered?

In his last package, he basically had to turn Tesla into a massive success (which everyone else thought would never happen) before his options vested. Glad he got a massive payout for those results.