Elon Musk's $1T pay deal is a troubling display of corporate capture
economist.com
economist.com
1T/8.5T is 12%. Hedge funds ask for more (yearly 2% + 20%).
Already with performance based compensation you have the problem with rewarding executives with the general market as opposed to their own performance. I mean, potentially Jensen Huang is terrible at his job and Nvidia is only making half of the money it should but the AI boom is covering for it.
100% performance means no one would man the ship of a failing company trying to correct the course.
Yes? We need more moonshots.
> I mean, potentially Jensen Huang is terrible at his job and Nvidia is only making half of the money it should but the AI boom is covering for it.
Why exactly do you think NVIDIA was well positioned for the AI boom? Jensen Huang saw it coming long before anyone else did, and oriented his company to be perfectly positioned.
You’ve got causality entirely backwards here.
If you had a company that was making buggy whips at the invention of the automobile, you expect the company profits to go down at no fault of the CEO. A better CEO just changes the slope not the direction.
So what you want to do is not reward based on performance of the company, but on the CEO and to do that you need to figure out the "wins above replacement" [1]. How much better did the CEO do than any schmuck chosen at random.
It’s essentially like a stock picker who only takes their fee from how much better their fund does vs the S&P 500.
What funds have that fee structure? Genuine question: I hadn't heard of any, but it intuitively seems "fairer" than the conventional two and twenty.
Article reminds me of a Delaware judge who also ruled that shareholders were not properly informed about the implications of their vote ‐ then after a very high profile court case and ruling ‐ shareholders voted a 2nd time to retroactively approve the same pay package. Who was right, this activist judge or shareholders?
It's funny how judges and The Economist's writers tell shareholders how they aren't really able to make an informed decision by voting their shares.
You ought to vote in a way that activists agree with!
Elon is too rich, how dare you vote for something that will make him and shareholders a lot of money!
"We know better than shareholders what pay structure is appropriate!"
Granted, Musk (or maybe it was a couple board members) did make some strong statements that felt like threats (that if the vote didn’t go through, Musk was going to leave).
But still, it went to a vote.
Sounds like a failure on to think critically.
The board consists of long time friends of Musk's, people who are heavily invested in his other companies (and so have and want to continue maintain their positive relationship with him), and his brother.
It's not that the board can't vote, it's that the board isn't remotely independent. And according to the WSJ A number of members of the board have hung around many late nights doing drugs with him.
And to be clear it's that that their doing drugs, it's that if you're close enough with someone to be regularly doing hard drugs with them you clearly aren't independent.