No Stock For You, Elon

January 30, 2024 2:59 PM

Delaware Court of Chancery judge Kathaleen McCormick has ruled that Elon Musk's $55B pay package at Tesla was unfair to stockholders and can be voided - a move that would put a significant dent in his wealth.

Earlier this month, Musk had threatened Tesla shareholders over moving his AI and robotics work to other companies he held unless he was given a greater stake in Tesla, a move that observers pointed out was likely driven in part by the judge looking to respond to this case. It is also worth noting that Judge Mccormick was also the judge that oversaw the case that forced Musk to buy Twitter.

posted by NoxAeternum (29 comments total)

Womp womp.

EDIT: I mean. When a Delaware judge is ruling against your corporate shenanigans...
posted by johnabbe at 3:03 PM on January 30 [38 favorites]

his AI and robotics work

Musk demonstrates absolutely no understanding of AI or robotics. His 'work' in this context comprises him paying smarter people to do the work. Tesla does not need him to do that. And the smarter people in question don't want to work for Elon, possibly because he's constantly high.
posted by His thoughts were red thoughts at 3:07 PM on January 30 [14 favorites]

I can't wait to see what kind of freakout he's going to have at 3am when the drugs start to wear off. We should put together a bingo card for him.
posted by aramaic at 3:08 PM on January 30 [13 favorites]

His main takeaway will be that the problem lies with the law that upholds the system which has shoveled to him all the rest of his gains.

And will work to change that law nonetheless.

This ruling is terrible news for cranially-impacted rectums everywhere.
posted by armoir from antproof case at 3:15 PM on January 30 [4 favorites]

He doesn't know much about psychology either, making his ownership of Neuralink highly problematic.
posted by johnabbe at 3:19 PM on January 30 [1 favorite]

Elon to Hawthorne: "Is my rocket ready yet??"
posted by torokunai at 3:20 PM on January 30 [1 favorite]

He doesn't know much about psychology either, making his ownership of Neuralink highly problematic.

Especially if you're a pig. Or a monkey.
posted by His thoughts were red thoughts at 3:24 PM on January 30 [5 favorites]

The transfer of assets to his other companies seems like embezzlement.
posted by interogative mood at 4:23 PM on January 30 [9 favorites]

“Tesla directors argued during a weeklong trial that the company was paying to ensure that one of the world’s most dynamic entrepreneurs continued to dedicate his attention to the electric-vehicle maker.”

Notice me, car-daddy.
posted by hototogisu at 4:41 PM on January 30 [8 favorites]

> And the smarter people in question don't want to work for Elon

Andrej Karpathy was the unreplaceable loss.

https://fortune.com/2022/07/14/andrej-karpathy-quits-tesla-ai-chief-trouble-for-elon-musk/
posted by constraint at 6:29 PM on January 30 [2 favorites]

In a stunning display of the entreprenurial savvy he's known for, Musk has apparently decided that this terrible thing happened to him because Tesla is incorporated in Delaware.

It's genuinely amazing that people think he's a smart guy.
posted by Pope Guilty at 8:09 PM on January 30 [15 favorites]

Am I wrong to think this has to be pretty damn egregious if a Delaware court is telling a corporation to back up with this hot mess?
posted by drewbage1847 at 8:24 PM on January 30 [8 favorites]

Yes.
posted by Back At It Again At Krispy Kreme at 9:41 PM on January 30 [1 favorite]

No.
posted by I-Write-Essays at 10:26 PM on January 30

Yes, it's egregious, but if you held Tesla shares, you were definitely asking for it, imo.

Seeing it clawed back is pretty funny, though.
posted by ryanrs at 10:50 PM on January 30 [1 favorite]

So, it is a case of Elon, gated?
posted by Calvin and the Duplicators at 2:00 AM on January 31 [8 favorites]

Someone pointed out that the recent neuralink announcement was likely an attempt to try to distract the media from some other upcoming bad news for Musk and that they were waiting with popcorn to find out what disaster had occurred.
posted by autopilot at 2:46 AM on January 31 [8 favorites]

"Never incorporate your company in the state of Delaware"

That's a nice glass onion that you've tied to your belt there.
posted by RonButNotStupid at 6:01 AM on January 31 [1 favorite]

Am I wrong to think this has to be pretty damn egregious if a Delaware court is telling a corporation to back up with this hot mess?

Not at all, which makes his whining about the Delaware courts so childish and on brand.

Basically the plaintiffs asserted and proved that:

One, the Tesla board is filled with people in Musk's orbit like friends and family, so the board wasn't truly independent.

Two, the board and Musk misrepresented the performance milestones, arguing that they were stretch goals when in fact analysts were saying they were in line with Tesla's trajectory at the time.

Three, the retention aspect of the package ran counter to Musk's public statements that he was sticking with Tesla for the long haul.

And when the judge says stuff like this:

“In the final analysis, Musk launched a self-driving process, recalibrating the speed and direction along the way as he saw fit,” McCormick said, making a tongue-in-cheek reference to Tesla’s self-driving car ambitions. “The process arrived at an unfair price. And through this litigation, the plaintiff requests a recall.”

You done fucked up.
posted by NoxAeternum at 8:00 AM on January 31 [7 favorites]

This seems bad? At the time, the New York Times claimed the deal was "as shareholder-friendly as they come". The $650 billion valuation was "a figure many experts would contend is laughably impossible". 80% of shareholders voted for it. Before the deal, Musk had talked about leaving Tesla.

This ruling basically destroys the idea of compensation plans based solely on outstanding performance and means we'll just get more record pay packages for executives driving companies into the ground.
posted by hermanubis at 9:29 PM on January 31

I recommend that you read the judge's decision, as it dissects those arguments. She points out that the compensation committee that was supposed to take an adversarial stance was stacked with people who had decades long ties to Musk, and by their very own sworn testimony noted that the process was biased towards him. In addition, the judge also points out that while Musk may have made comments about leaving, his testimony and other statements made it clear those weren't serious and he had no intent of leaving. Basically, the idea of this package being "shareholder friendly" and about performance pretty much collapsed under the testimony during the trial.

Also, in Yet Another Example Of Musk's Ego Blowing Up In His Face, instead of hiring a law firm that specializes in these sorts of deals (and would have pointed out the weaknesses that became blaringly evident during the trial), he and Tesla used...his divorce attorney (who was made general counsel for Tesla), whom the judge called out for crying over his admiration for Musk during his deposition. Not only could he not even put the barest of fig leaves on the idea of an independent board, but he couldn't be bothered to get actual counsel that understood the assignment.
posted by NoxAeternum at 4:05 AM on February 1 [8 favorites]

(Also, another point that came out in the trial was that the board and compensation committee left out something that is a bog-standard part of retention deals - a clause requiring the executive to devote their attention to the company in question. Which was something that undercut the defense, because if you're arguing that you need to give someone the largest compensation package ever to retain their services, why wouldn't you include this very standard clause in it?)
posted by NoxAeternum at 4:20 AM on February 1 [3 favorites]

And in what is purely a reasoned business decision and not the legal equivalent of a tantrum based on spite, Musk is now calling for a shareholder vote to authorize reincorporation in Texas. The problem here is that even if he gets the votes (and after the past few months, he may very well not have them), reincorporation isn't just his decision. The state of Delaware also gets a say, and as long as there's an outstanding ruling in the courts, the state is unlikely to sign off on dissolution.

That said, he could then try to go the bankruptcy route, but...he might want to ask Wayne LaPierre how that worked out.
posted by NoxAeternum at 7:37 AM on February 1 [2 favorites]

> NoxAeternum: "he and Tesla used...his divorce attorney (who was made general counsel for Tesla), whom the judge called out for crying over his admiration for Musk during his deposition"

Waitaminute... a very rich, right-wing loon who engaged a lawyer who was way, way out of their depth (legally speaking) but also a major league kiss-ass? This seems like a familiar tune.
posted by mhum at 11:51 AM on February 1

Don't think this was posted - worthwhile and satisfying.
Elon Musk’s unlikely foe in $56bn pay defeat: US thrash metal drummer
He holds 9 shares. :D
“His name is now etched in the annals of corporate law,” Talley said. “My students will be reading Tornetta v Musk for the next 10 years.”
posted by Glinn at 1:29 PM on February 1 [2 favorites]

Oh, and speaking of Tesla and lawsuits, several California counties are suing over the company's mismanagement of hazardous waste.
posted by NoxAeternum at 1:59 PM on February 1 [1 favorite]

oh, actual hazardous waste, not his posts
posted by ryanrs at 12:55 AM on February 2 [2 favorites]

Also, if you're wondering how the Chancery Court case could have gone so badly, Musk getting caught out in a blatant lie while testifying should make it abundantly clear.
posted by NoxAeternum at 6:27 AM on February 2

In more Musk testimony news, he has been ordered to sit for a deposition in the defamation case that he is currently facing. The fun part is who will be deposing him, as the plaintiff's counsel is Mark Bankston, best known for getting to inform Alex Jones that because of his lawyer's stupidity, he now possessed a full copy of Jones' phone memory.
posted by NoxAeternum at 7:03 PM on February 29