The board of directors has a legal responsibility to govern in the interest of the shareholders.
The argument is that the board giving $750mm of shareholder money to themselves is not in the interest of the shareholders for somewhat obvious reasons.
The argument is that the board giving $750mm of shareholder money to themselves is not in the interest of the shareholders for somewhat obvious reasons.
This is not currently the case with Tesla, but the stock has a reputation for being volatile.
If the price is going up the existing investors now own a smaller percentage of a more valuable company.
It’s just more obvious if you get diluted while the company doesn’t change value.
It is a transfer of $735m from shareholders to directors that is being reversed and sent back to shareholders, where else could it possibly go? (Well lawyers, but that's another discussion.) Note I'm saying nothing about whether this is good or bad or anything else.
Even in regards to the boards comp they were stock options not stock so the compensation is based on the option strike price not just appreciation.
I hate business media.
FWIW, that number is really badly spun. The grants date back to 2017, when Tesla's market value was 30x lower. So at the time, the grants were more like $20-30M, hardly the kind of hyperbole-inducing sort of thing. They only look huge now because Tesla has been so successful.
And thus, more to the point: arguing that you, as a TSLA shareholder, were harmed by the behavior of corporate governance during a period where you made back a three thousand percent return on your investment is... kinda batshit, honestly.
Now that said, I don't know anything about the history of shareholder lawsuits or how likely this was to have been successful. It seems like the board capitulated, at least in part. So... no harm no foul, I guess.
Here is complaint: https://cdn.arstechnica.net/wp-content/uploads/2023/07/tesla...
If you're saying $20-30 million is not hyperbole-inducing, I suspect you're thinking more of CEO pay, but CEO is an actual full-time job.
If it turned out that they'd embezzled a hundred million would you say it's fine because the company still did well?
Fundamentally all they did here was pay themselves. Were they paying themselves too much? Well, yes, in hindsight (at least according to conventional notions of board propriety). But in the context of returns like that? I think the bar for proof of "harm" against the shareholders would be seemingly very high.
The argument of harm would come into play if there was no disagreement that the money belonged to the directors, and the directors had harmed the plaintiffs in a quantifiable amount. Then that harm would justify transfer of assets from directors to plaintiff.
But that’s not the argument here. The argument is that the funds did not belong to the directors in the first olace and they are being returned to their actual owner.
This is based on the theory that all the money involved was the property of shareholders, and any amount of it that ended up in directors pockets has to be explained and justified.
There’s no argument of “harm” being made it’s an argument of misappropriation of what isn’t theirs, and specifically that despite having a very clear legal obligation to act only in the interest of shareholders and not themselves the directors did not meet that obligation.
They returned $735 million, but "agreed not to receive compensation for 2021, 2022 and 2023, and change the way compensation is calculated", so presumably the total amount saved is far higher.
I have company X, which you think is worth $15. Company X has 10 shares of stock. I happily sell you one for $1. You are excited because you have decided it is worth $1.50 ($15/10). I am happy because I have a dollar. Tomorrow, I issue myself 10 new shares of stock. I am still excited, more for me. You are sad because now your one share is worth only $0.75 ($15/20).