Moving Tesla will be much harder.
In the case of Tesla in Delaware at least, the court did not optimize for shareholders wishes. This is what has Elon wanting to move out of Delaware as much as the comp.
It wasn’t an ask. It was a payout agreed to by the board and shareholders if and only if he added a trillion dollars of value to the company. He did that, and now a court denied the deal.
If my company signed a deal where I would get an astronomical bonus for pulling off the impossible then reneged when I did it I would be pretty pissed.
I can find plenty of articles talking about the repeal of that law in 2022, but I haven't found one that tells me when it was enacted. Does anyone happen to know?
In 1993 Microsoft moved from Delaware to Washington. Microsoft went public in 1986 and so I'm having a hard time imagining that they could have gotten unanimous shareholder approval for anything in 1993 and so infer that the unanimous requirement law came sometime after that.
Matt Levin's take is top notch as always: https://archive.today/XMmoF
> Of course, this is the reason to incorporate in Delaware: Someone is keeping an eye on managers and boards of directors to make sure that they’re running the company in the best interests of all of the shareholders, not just those of the idiosyncratic controlling founders. You can raise capital from investors more easily, because the investors trust that there are rules to protect them, that they are not subject to the whims of self-interested entrepreneurs.
> And yet there is something awkward about a judge second-guessing the CEO compensation decisions of the board of directors of a $600 billion company, even if, yes, it’s the board of Tesla. Musk wanted this pay package, Tesla’s board thought it was a good idea to give it to him, and a majority of Tesla’s shareholders voted to approve it. And then Musk did in fact create a trillion dollars of shareholder value, earning his big pay package and making the shareholders happy. Most of them. But one complained, and that’s enough for a judge to reverse the board’s decision.
> This is not a Delaware thing, really, though it is possible that business courts in Texas or wherever might be more sympathetic to CEOs generally, or to Musk specifically. (Bloomberg reports that “Musk also asked X devotees Tuesday to vote on whether he should shift Tesla’s incorporation papers to Texas,” sure.) It is a public company thing: If you run a public company, not only do you have corporate-law fiduciary duties to your shareholders, but you also have genuinely outside shareholders, index funds and activists and gadflies and anyone else who wants to buy stock. If you run a private company, even one incorporated in Delaware (as, for instance, SpaceX is), you can have a lot of control over who your shareholders are, and you can run the company the way they want, which is usually also the way you want. If you run a public company, you have no control over who gets to be a shareholder, or what they can complain about, or what a court will make of their complaints.
> You know what’s really awkward? A few weeks ago, even as this decision was pending, Musk was out publicly demanding another giant stock grant from Tesla’s board. The threat that was implicit in the 2018 pay deal — if the board didn’t shower Musk with options, he’d take his attention to SpaceX or elsewhere — is explicit today; Musk posted that he’s “uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control,” and that “unless that is the case, I would prefer to build products outside of Tesla.”
https://archive.is/LsUy9#selection-5105.0-5109.27
> Still, I mean, the bet here for Elon Musk is reasonable: If he moves Tesla to Texas, and then demands that Tesla’s board pay him $100 billion to keep a reasonable fraction of his time and attention on Tesla, and Tesla’s extremely accommodating board says “sure whatever you want,” and a majority of shareholders approve the pay package, and one disgruntled shareholder sues, and the case goes to Texas business court, and the complaining shareholder comes into court citing conflicts of interest and the board’s lack of independence and the Delaware cases on “entire fairness,” and Elon Musk comes into court saying “well that may all be true but what you are missing is that I am Elon Musk,” and Texas Governor Greg Abbott is in the first row of spectators with a big sign saying “TX <3 U ELON,” is the Texas business court, in its first real high-profile case, going to say “actually it’s illegal to pay Elon Musk that much”? It absolutely is not. That much is pretty predictable.
Having your $50 billion payment case heard is not predictable. This whole situation is so unique, I'm not sure anything here generalises past Elon and Bezos.
Shareholders, a different group of whom are supposed to be benefited by this new move, gained $50 billion in the court case. About 10% of the value of the company. Even Musk, in his role as shareholder, not employee, benefited with a massive win.
"Shares of Tesla dropped about 2% in premarket trade"
Apart from the usual CEO worship, isn't the fact of the case that the rewards were assigned for targets that internally were already assumed to be met?
That said, the case didnt turn on the question if they were likely. It was based on: 1) incomplete disclosure that the compensation team may have conflicts of interests, which opens the door for arguments that the comp wasnt fair, and then 2) an argument that it wasnt a fair deal because 50B provided no extra motivation because Musk already had enough stock to motivate performance