Court's opinion/judgement [1], and a PDF version [2]
[1] https://www.courtlistener.com/opinion/9470356/richard-j-torn...
[2] https://courts.delaware.gov/Opinions/Download.aspx?id=359340
[1] https://www.courtlistener.com/opinion/9470356/richard-j-torn...
[2] https://courts.delaware.gov/Opinions/Download.aspx?id=359340
The other argument was that the board didn't meaningfully push back on the proposed remuneration scheme. Yet, it amounted to a huge gamble - multiplying the value of a 50B company by over 10x -, which in case of success the board agreed to reward with 6% of shares. It sounds silly to me to suggest the board failed their duty when shareholders - including them - had record profits even discounting Musk's reward.
In Eastern Europe we were calling this tunneling of a company - create a tunnel with help from inside to get riches out and leave the shell to its own demise.
Elon prefers to call it “boring.”
*edit: Model Y
I guess it was the Model Y!
If Tesla doesn't live up to the hype it created - and I believe there is virtually 0% chance it does - and the stock inevitably crashes - say 90% from here, will your judgement be the same ?
But anyway, the trail is not really about that - it's about proper governance. If you're a public company you get to benefit from a lot of things, but you do have some obligations. And those were pretty clearly broken - keep in mind that this complaint was filled in 2018 - just after the package was awarded.
Just to be clear - I do think that what Elon Musk did, lifting Tesla from a startup to a top10 carmaker, is absolutely remarkable But this judgment has nothing to do with it.
There are now happy Tesla owners everywhere, and it’s perfectly placed to benefit from the AI wave he knew was coming, enough to found OpenAI
But even if true what effect does that have on her arguments. She never claims having these relationships is unusual. She only states that the minority shareholders were not informed about them.
"Yet, it amounted to a huge gamble - multiplying the value of a 50B company by over 10x -, which in case of success the board agreed to reward with 6% of shares."
Her opinion emphasises that Musk indicated, repeatedly, he had no intention of ever leaving Tesla. What was the gamble. No matter what happens he still stays working there forever. Where is the leverage. Musk was even dumb enough to admit he was "negotiating against himself".
Try going to your boss, promising you will never, ever leave and then ask them for a raise.^1 Imagine the boss has no personal relationship with you and acts in the best interests of the company.
1. Just in case anyone becomes confused: I am not suggesting what Musk was "negotiating" was a "raise", I am simply using as a hypothetical a more common scenario amongst mere mortals where compensation is being negotiated and the threat of leaving can be used as leverage.
That was not a raise, it was a contingent payout. One could argue that kept him focused. Once done, he could scatter his attention to things like hostile takeovers and the meaning of free speech.
One could argue, as judge argued in the above excerpt, that his 21.9% ownership (before this compensation) of Tesla is what could keep him focused...
B: OK.
E: I would like some incentives, including more money and increased control over the direction of the company if I hit certain milestones.
B: And what if we say no?
E: Um, I guess I'll just keep on working toward the milestones.
Did Musk get suckered into working with more focus than he would have absent the compensation package. As long as he believed he would get it, it worked to keep him focused. Yeah, right. By his own statements he would have kept on working with focus even if he was not promised the compensation package. Either way, there is no need to give it to him. He is not going anywhere.