Lawyers who voided Elon Musk's pay as excessive want $6B fee
ca.news.yahoo.comI am confused. These are the lawyers that sued Tesla and won, not Elon/Telsa's lawyers, and they want that sort of payout due to the cost savings to Tesla? If so, I wonder who funded the original lawsuit -- was that not enough -- or was this the idea all along?
It's straightforward. The attorneys are arguing that because they have prevented what amounts to the embezzlement of $50b from Tesla and its shareholders, they are entitled to close to 10%. This is similar to SEC whistleblowers.
> The Commission is authorized by Congress to provide monetary awards to eligible individuals who come forward with high-quality original information that leads to a Commission enforcement action in which over $1,000,000 in sanctions is ordered. The range for awards is between 10% and 30% of the money collected.
> prevented what amounts to the embezzlement
How does it amount to embezzlement? I understand the SEC reward is for whistleblowing, but how is it whistleblowing if the information want publicly available via filings?
Elon packed the board with personal friends who would never in a million years turn down any compensation package he asked for. The extent of their relationship was not disclosed in public filings. It's reasonable for the shareholders to ask if maybe the money could have been better spent on R&D or a cheaper CEO than being shuttled off as personal funds for the CEO.
> Typical elements of the crime of embezzlement are the fraudulent conversion of the property of another person by the person who has lawful possession of the property.
You can read about the extent of the alleged fraud in the judgment, but it is clear that the board was nothing more than sycophants _not_ acting in the fiduciary interest of the shareholders.
https://courts.delaware.gov/Opinions/Download.aspx?id=359340
> The Proxy failed to disclose any of the Compensation Committee members’
> actual or potential conflicts with respect to Musk.747 In fact, the Proxy repeatedly
> described the members of the Compensation Committee as independent, stating:
> “The[] [Grant] discussions first took place among the members of the Compensation
> Committee . . . all of whom are independent directors;”748 and “[t]he independent
> members of the Board, led by the members of the Compensation Committee, spent
> more than six months designing [the Grant].”749 The Proxy’s introductory letter is
> “[f]rom the Independent Members of Tesla’s Board of Directors,” and the first four
> signatories are Compensation Committee members Gracias, Ehrenpreis, Denholm,
> and Buss.750 Notably, Gracias signed as “Lead Independent Director.”751
> The description of the Compensation Committee members as “independent”
> was decidedly untrue as to Gracias and proved untrue as to the remaining committee
> members.
Thanks. That provides much better context.
"If so I wonder who funded the original lawsuit -- was that not enough -- or was this the idea all along?"
The plaintiffs law firms "funded it" by working for free, on a contingency basis: if plaintiffs win, the law firms get paid for their work. They won. Now they seek payment for their work.
But instead of from their client, they seek payment from their victim—the company's shareholders, including market indexers such as retirement funds.
Their client is a group of the company's shareholders.
I don't understand why everybody thinks this fee is outrageous. These lawyers just saved Tesla's shareholders way, way more than that. Pay $6 billion to get $50 billion? I'll do that deal all day long and twice on Sundays.
Not if Elon decides to leave Tesla. In this case, this was a catastrophic failure.
It might be better for Tesla shareholders than the past two years when he’s been essentially absent, but nobody else can step in to make decisions. The company is clearly behind in core product development and spent way too much time on Musk’s stale old follies like the Cybertruck.
Oh damn yeah, then they might miss out on Cybertruck 2.0
Elon leaving Tesla would be the one thing _to_ make me invest. The company has fantastic growth potential being squandered by Musk on useless products like the Cybertruck.
And how have your investment returns over the past 15 years stacked up against someone with all their savings invested in Tesla?
Elon leaves Tesla:
- Tesla finally settles with unions and starts treating their employees fairly.
- Tesla addresses the water pollution of their Gigafactories in Europe.
- Tesla signs that collective bargaining agreement in Sweden so they can finally sell cars there (and have their charging stations unblocked).
- Tesla adapts their marketing to stop claiming auto-pilot bs.
- Tesla adapts their quality control so Tesla cars are no longer delivered to customers in a semi-assembled state.
- Tesla starts investing in research for more sustainable disposal of batteries and alternative means of energy storage
I can see a lot of upsides to Musk leaving Tesla (on top of the $50B)
It looks great on paper, but isn't their core customer going to drop them without elon?
Tesla's core customer is a person buying a fairly spartan EV sedan or crossover. That's not going to change until the current rate of Cybertruck production and pre-order delivery acceptance changes.
chuckke nobody buys a car because they feel like giving a billionaire money.
I mean, if you can afford to spend $100k just to simp for Elon Musk, god bless you, but the rest of us want $100k of value when we pay $100k for a car.
The board, run by the shareholders, wanted that deal and put it in place. They must have thought that the value add was worth it. Granted, it seems many do not think they acted correctly, hence the ruling and the lawsuits.
The point is that time will tell if this really saves money over the long run. I do not know the law and I am not questioning the board here.
// The board, run by the shareholders //
If the board was representative of the shareholders wishes, the shareholders wouldn't have sued the board.
About 78% or so of the shareholders voted in favour of the deal. And will probably vote again when asked. The lawsuit was done by a shareholder with a total of 9 (nine) shares.
If those 78% of shareholders believe that Elon having $56B MORE is a priority in their lives, then should just voluntarily give Elon their shares or send him cash.
Companies and shareholders meetings work a bit differently than what you suggest. Other than that, the grand majority of Tesla shareholders are quite happy with the financial state of the company and would like for Musk to continue leading the company and be compensated for it.
I realize that. But there is nothing stopping them from sending him money, if they think he deserves it.
They thought he deserved it, and voted to send him the money. Then this guy started stopping them.
It turned out this guy's claim was justified, given the court agreed. Again, if it was really important to these investors that Elon have more billions, they do not need any courts permission to just send him money.
Try to think about this from the shareholders’ point of view.
They want Elon compensated with the bonus he hit very difficult growth targets to earn because they want to make money from him further growing the company.
If they just donate the shares they personally bought, then they don’t make money. They lose it.
I get that, but my proposal is the same thing. The shareholders could indicate that the only reason they are sending the money is because he met the targets. Therefore he knows that he got the money for meeting target -- precisely the same outcome whether from the company coffers or from individual investors.
Those billions could have gone directly to shareholders as dividends, or reinvested in the company for future growth. Either of these would be better at making money for investors. I question the logic that giving it to Elon will motivate him any differently than a lesser, but still very generous compensation would have.
It is presumed here that money is what is driving Elon (or other already billionaires). This is only ever partially true. People like him also love the power of being in charge and notoriety. Those are likely worth more than the money for Elon in particular. The board and investors should, as is their fiduciary duty, pay the minimum needed to keep him doing what he's doing.
I don't think you do get it. The company has lost $75B in market cap since this activist ruling and will likely lose much more going forward, especially if the ruling is not overturned on appeal.
Not only that, but I think it's a real loss for the US in general and Deleware in particular as a good environment for business that respects property rights. Some guy with nine shares of stock overrode the wishes of over 3/4 of the shareholders and his lawyers may extract billions from the company which the market clearly sees as having been harmed by their actions.
I doubt the $75B drop was BECAUSE of this ruling and if that's your assertion, it would need some evidence to back it up. Delaware has one of deepest bodies of case law for corporations and if Elon and the board acted inappropriately as they were found to have done, then it shouldn't matter if the case was started by a shareholder of 1 or a million shares.
Think of all the employees that 56B could hire to increase the quality of the end product.
One person with domain knowledge of running things could be well worth it. How many times have you seen adding more people just make it a bigger, more unsustainable mess?
Granted 56 billion is a lot.
The board is responsible to the shareholders, but did not act in their best interests.
I don't get if this is sarcasm or not... Just in case it isn't:
This is _exactly_ the argument for Musk's case. The lawyer was hired (and managed) to convince the court this argument is wrong.
Musk would be paid in stock, so the "shareholders" did not win or lose anything (unless we assume the shareholders are at war with each other). If he turns sour ... i cant imagine the shareholders feeling like they won much.
In other news, cheap EVs are entering the market so maybe it's a good opportunity for Elon to escape Tesla before it becomes a legacy brand name that some chinese maker will buy in a few years (like chevrolet or sth).
> did not win or lose anything
Is this true? Would there not be dilution?
There absolutely will be
Since the stock went up 10x during the timeframe of the deal, the shareholders benefited a lot.
Some shareholder benefited a lot. Some bought at the top and have only had negative returns. Some have a net zero cause the bought at this point on the way up.
Just because some people have astronomical returns doesn't mean everyone received the same.
We are talking about the shareholders who voted for the deal 6 years ago. The share is 10x since then. That’s why Musk was awarded the shares.
Especially if they hold TSLA indirectly through ARKK.
How would there be dilution? He got stock options
he s a shareholder too, no? net should be zero
An example with smaller numbers: Suppose a company is worth $10 and has 10 shares. The board issues 10 more shares to one person.
Sure, the company would still be worth $10. But there are now 20 shares outstanding. Everybody except the guy who got 10 shares would see their shares fall in value from $1 to 50 cents.
Basically, issuing stock to one person has the effect, mutatis mutants, of transferring wealth from all the other shareholders to the person who got the new stock.
Still the total value the shareholders hold is the same so they have have not been damaged as a group, which is alleged here. The damage is psychological, i.e. most of them are jealous of one of them
That makes no sense.
Any money or shares Tesla pays to Elon is money or shares that could instead be used to pay dividends to the shareholders or to buy back shares, which increases the value of all the shares that have not been bought back.
That's again assuming that elon is not a shareholder
The dividends/buybacks are irrelevant. Anyone could sue to cut down dividends to increase buybacks or vice versa but thats besides the issue
The whole conversation about dilution is irrelevant: elon was granted stock options, there would be no issuance of new stock
chuckle so if you had $100,000 of stock, you would in no way feel like you had been ripped off if you logged in tomorrow and it was only worth $50,000? Because...that $50,000 was transferred to the CEO's stock account? After all, the $50,000 didn't just disappear, it transferred to the CEO's stock account, so it all evened out...
...man if you really feel that way, can I interest you in some stock? I'm thinking about making a start-up...
Sounds like they need to hire more lawyers to argue that the first set of lawyers' pay is excessive.
I could see this as a recursive lawsuit. One set of lawyers negiotates the pay down to the payment down to 3 billion. The next set of lawyers argues two billion is too high and negiotates it down to 1 billion, all the way to zero. It's lawers all the way down!
Hopefully the series is convergent. Altho I would not bet my life on it.
Welp if he wants revenge he can grant them their billion stock and then start selling the next day. Tesla is a meme, and so are these lawyers
I despise lawyers.
Until you need one
I’d love to see a legal system that is comprehensible enough for a layman so pro se is the go-to option and the lawyers are for the real tricky cases, or people who can’t or don’t want to even think about it.
Not happening, of course. Modern legal systems have incentives to build barriers.
(For what it’s worth, I’ve never needed a lawyer and I’ve dealt with immigration in two countries and some basic legal stuff. Wasn’t a rocket science - the worst of it were all the unwritten rules. But of course, that was quite simple and straightforward stuff - surely, there are legal issues that are much more complex.)
// a legal system that [laymen can understand] //
Alas, you wouldn't like a legal system which a layman could understand, any more than you'd like a computer which a layman could understand.
We are doing things, as a society and as a species, which take far longer than one individual lifetime to learn, so we divide up the work and specialize.
I could be wrong or naive, of course, but...
> so we divide up the work and specialize
There's an important key difference - no one is forcing anyone to understand how computers work in detail, and the situation where one needs this specialized knowledge is quite uncommon. Thus, this can be left to the specialists.
I do believe, though, that everyone should probably know how the computers work at the extremely high level, though. Because virtually everyone deals with computers those days, so this knowledge is nearly essential. And if someone wants to learn more for whatever reason - they should be more than welcome to do so, without any artificial barriers. No one should ever say "computers are really hard, only licensed engineers should be allowed to... (idk what)"
In the same way of logic, consider that everyone is a part of a legal and political systems, whenever they want it or not. Which is why I'd like to make those as accessible as reasonably possible, with the basics well comprehensible so you don't normally need a lawyer.
I think a better comparison could be with electricians, plumbers or builders. And with those, no one should need a specialist to do basic stuff (like replacing a light bulb or installing a bidet), and no one should be actively discouraged from learning more advanced things.
I'm saying this as someone who re-wired a fire hazard of an old house (with copper-aluminium twists from '40s, no grounding, and so on) up to a proper code (checked with a real electrician, of course), installed a water heater after old one had failed, replaced a car radio, etc. - just because I had time and desire to learn and do it myself (also saved some money). At the same time, I've happily went to a mechanic when there was something with the starter and I'm about to call a contractor for a simple leaky faucet, just because I don't have time for this.
Computers or anything else - I'm all for all the modern man-designed systems to be understandable and/or serviceable. So anyone with a working brain can do things themselves if they want it and have time for it, and no one is forced to hire anyone unless they prefer it that way (which is totally fine - like you've said, we divide work and specialize, optimizing our resources). Save the obvious exceptions where the risk of harming others is too high - e.g. the building codes are there for a good reason.
And I'd say some legal systems look way too unnecessarily complicated (or poorly designed) to me. And popular culture is complicit in re-enforcing this isn't helping - it's reinforcing the current status quo. Which seems to contradict the whole idea of resource optimization.
// no one is forcing anyone to understand how computers work //
There is something very right about this, or the implication of this: Everybody, no matter how dumb or smart, rich or poor, educated or illiterate, is expected to comply with EVERY law, all day, everyday, 24/7, every minute of their lives. Whether they know about those laws or not.
So yeah, having a broadly understandable and accessible legal system is a necessity.
Nevertheless, at the rate we are inventing new algorithms (like LLMs), new financial techniques (like derivatives) and are going into new realms (like space), there are exponentially more opportunities for people to collaborate with each other--or, unfortunately--harm each other. So we need ever more laws. A few, simple laws just cannot give us all the protections we want, or create enough of a space for cooperation. There is an element of irreducible complexity.
I think there are many people who held no opinions about lawyers UNTIL they needed one :)
I personally have had only positive experiences, but I've heard the horror stories. Beyond just the expected divorce stuff. Of course what matters are the circumstances.
Until you need one to defend you from... another lawyer.
A pattern emerges
IMHO, it's high time to stop paying lawyers, accountants, notary publics (in Germany) and similar professions in percentages.
There is no way a bunch of lawyers deserves that kind of payout.
Who gets to decide how much everybody "deserves" for their work? Answer, the payer and the payee.
You don't get what you deserve, you get what you negotiate.
Or, in this case, what you potentially can sue for? Nothing here was negiotated as far as I can tell.
Lawsuits and war are just negotiation by other means.
So surely you wouldn’t object if these attorneys just started turning up dead.
No, I wouldn't be ok with that :-) perhaps I overstated my case a bit.
The law decides that. These compensations are not determined by some open "market" , but by what is basically protectionism for the legal professions in most countries. And guess who writes the laws.
> Who gets to decide how much everybody "deserves" for their work? Answer, the payer and the payee. You don't get what you deserve, you get what you negotiate.
...unless you're Musk who negotiated a deal with the company he leads only to have a few shysters insisting the deal is off while claiming 10% of the negotiated deal for themselves.
The board of Tesla did agree with the terms and conditions, probably because they thought the conditions would not be met.
Is a notary public in Germany a notary in the British sense or in the American sense? Because American notaries get paid peanuts.
IIRC, neither - Continental European notaries have a governmental mandate but are not government officials themselves.
In Germany, the issue is with real estate - about 1% of the price go to notary fees, which is many thousands of euros for most purchases. No matter what, this is outrageous.
Set maximum billable rate at minimum wage. That seems only fair solution. It is enough for many workers, should be enough for anyone.
chuckle why stop there? motherhood seems to be a quite important job. I don't know about you, but my mother didn't even get minimum wage for all her mothering.
How much she got is the same number, whether you measure it in dollars, euros, or pounds: 0.00
In many European countries, you actually do get government assistance for children [1].
Minimum wage never meant livable wage. A specialized professional is typically paid a market rate many times higher than minimum wage. I’m not sure why lawyers should be treated differently (regardless of feelings towards some).
This is literally not true:
It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country. By "business" I mean the whole of commerce as well as the whole of industry; by workers I mean all workers, the white collar class as well as the men in overalls; and by living wages I mean more than a bare subsistence level-I mean the wages of decent living.
- Franklin D. Roosevelt
The idea that minimum wage was never a living wage and never meant to be is a rewriting of history.
Thanks for the reference.
That makes no sense, as it equally rewards lazy people with abilities too lazy to be applied, and people who took years out of earnings to learn new skills.
Of course, the comment might have been obvious trolling.
Not trolling. What, pray tell, is a fair wage? Who gets to decide?
// people who took years out of earnings to learn a new skill //
Here in Indiana, you have to have a Master's degree to be a teacher. Average wage is around $50k. Or you could get a B.S. in communications an and make 2-3x that doing P.R.
Or you could just drop out of high school to become a "creator" at only fans and make zillions a year taking pictures of your toes.
If you want a system which rewards years of learning new skills, this one ain't it.
A fair wage is what the market will pay. Unfortunately for most teachers, there is not a fair market, but a vise with government and unions on either side they’ve created for themselves. Also, when teacher salaries are evaluated at an hourly rate (30 hour weeks, 11-weeks of vacation per year), it’s not as bad as it seems.*
* My wife was a teacher, my parents were teachers, my aunts and uncles were teachers, my grandparents were teachers, my kids are in school and I deal with their teachers. I’m sympathetic to the profession, and have also watched how those steering the ship head right for the iceberg while telling everyone warming them that they aren’t educators so they couldn’t possibly understand. I’m fine letting them lie in the bed they’ve made while getting paid a zillion times more being an IC at a company on one has ever heard of.
// A fair wage is what the market will pay //
Well, I wouldn't go that far (cf. my example above on the pay differential between the oldest profession and the second-oldest profession) But it does at least set prices in a way which both buyer and seller agree on.
// they aren't educators, etc //
You have a way to let teachers make substantially larger wages? Let's hear it:-)
Private tutor?
What's stopping teachers from being private tutors now?
Good question
The answer is that being a private tutor, on average, pays even less than they make now.
You know how I know that? Because they aren’t already doing that.
How many families could afford the salary of even one teacher?