Matthias Hohensee’s Post

A new blog post (and a long one): Preliminary Thoughts on the Outcome of the Tesla Annual Shareholder Meeting Part 2: The Compensation Vote #tesla #teslaannualmeeting In 2018, Elon Musk's compensation package from Tesla was a landmark deal that set a new standard for executive pay. Instead of a traditional salary or cash bonuses, Musk's compensation was tied entirely to Tesla's performance, specifically its market capitalization and operational milestones. The package included a series of 12 tranches of stock options, each exercisable only if Tesla reached specific targets related to market cap, revenue, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). At Tesla's just concluded annual meeting the board put the following proposal to the shareholders for a vote: "Following the recommendations of the Special Committee, the Board, with Mr. Musk and Kimbal Musk recusing themselves, has determined to seek ratification by stockholders of the 2018 CEO Performance Award (such ratification of the 2018 CEO Performance Award, whether under common law or under Section 204 of the DGCL, the “Ratification”), and determined that the Ratification is in the best interests of the Company and its stockholders, and recommends that our stockholders vote to ratify the 2018 CEO Performance Award at the 2024 Annual Meeting." My post discussed the legal issues raised theby.

Interesting development Glass, Lewis & Co., an influential proxy advisory firm, has urged Tesla shareholders to vote against Elon Musk's proposed $56 billion pay package at Tesla's 🗓️June 13 annual meeting. Reasons Cited: 📋 - Glass Lewis called the pay package "excessive" in size and highlighted its potentially "dilutive impact" on existing shareholders if the stock options are exercised. - The firm had previously raised concerns about the lack of repricing prohibitions and the "quantum of pay" when the package was first approved in 2018, but says its core concerns remain unaddressed. Other Recommendations: - Glass Lewis also recommended voting against Tesla's proposal to redomicile from Delaware to Texas, stating it provides "uncertain benefits and additional risk". - It advised against re-electing Kimbal Musk, Elon's brother, due to lack of independence. Board Counterpoints:📉 - Tesla's board, is urging shareholders to reapprove the pay plan, arguing Musk has worked for years without being paid. - Some large institutional investors like Baillie Gifford have voiced support for the package, citing Musk's vision and drive as key to Tesla's success. - The pay plan ties compensation to ambitious operational and market cap milestones that could significantly increase Tesla's value if achieved. The ownership structure of Tesla (TSLA) stock is a mix of institutional, retail and individual investors.Approximately 40.27% of the company's stock is owned by Institutional Investors, 13.64% is owned by Insiders and 46.09% is owned by Public Co.s and Individual Investors. #executiveCompensation #Activism #ESG #Stewardship

Tesla Shareholders Face Crucial Vote on Musk’s Pay Package Tesla shareholders are being urged by influential proxy advisory firm Glass Lewis to reject Elon Musk's proposed $56 billion pay package, citing its "excessive size" and potential to devalue individual shares. Amalgamated Bank and others have written an open letter opposing the package, arguing Musk's focus is split among his other ventures. Both Glass Lewis and opposing shareholders recommend voting against the re-election of Kimbal Musk, Elon's brother, due to concerns over independence. Executives, including board chair Robyn Denholm, are actively seeking investor support worldwide.   Shareholders will vote on Musk's compensation at Tesla’s annual meeting on June 13. Although investors approved the payout in 2018, a judge voided it in January, necessitating a new vote. Glass Lewis also advises voting against Tesla's proposal to move its incorporation from Delaware to Texas, citing uncertain benefits and added risks. This vote is critical for Tesla's future governance and strategic direction. What are your thoughts on the proposed pay package and relocation? #ExecutiveCompensation #Tesla #ShareholderActivism #CorporateGovernance #Investing

Wow! Unbelievable! Tesla Inc. shares jumped in early trading after Elon Musk said shareholders voted “by wide margins” in favor of re-approving his compensation package and moving the company’s state of incorporation to Texas. The chief executive officer posted voting results on X, the social media site he owns, hours before shareholder voting ended and ahead of Tesla’s annual meeting Thursday in Austin. He shared two charts suggesting the proposals had been approved. Tesla shares jumped as much as 7.2% before the start of regular trading. Musk and Tesla’s board have spent the last two months rallying support for the measures, putting particular emphasis on the pay deal that made Musk eligible for as much as $55.8 billion in stock options based on the company hitting certain milestones. A Delaware judge voided the award earlier this year, pointing to conflicts of interest among Tesla directors and disclosure failures. The vote on Musk’s pay carries more symbolic weight than legal power. While shareholders’ approval may help Tesla with an appeal or a rehearing in a new case, the company acknowledged in its proxy filing that it “cannot predict with certainty how a vote to ratify Musk’s compensation would be treated under Delaware law.” “This doesn’t fully settle the matter; the compensation package can still be deemed illegal,” Piper Sandler analyst Alexander Potter wrote in a note to clients late Wednesday. “We expect the stock to respond favorably to this news, though the upside is perhaps unlikely to be as violent as the downside would have been, had shareholders rejected the deal.” Tesla Chair Robyn Denholm engaged with large institutional investors on the proposals, and the company placed several ads related to the vote on X. In the final days of the campaign, several current and former executives and engineers posted on the site in support of Musk. Those in favor of re-approving the CEO’s pay included Scottish asset manager Baillie Gifford & Co., Cathie Wood’s Ark Investment Management LLC and Ron Baron, who runs Baron Funds. Baron, a longtime Tesla investor, said in an open letter that the will of the shareholders who voted in 2018 should be favored. Without Musk, there would “be no Tesla,” and this vote might determine whether he stays at the company, he said. Those against the proposal included Norway’s sovereign wealth fund, Norges Bank, and California Public Employees’ Retirement System. Shareholders also voted on Tesla’s proposal to move its state of jurisdiction to Texas. In its proxy filing, the company said it may face legal challenges to the relocation, including from shareholders objecting under Delaware law. The shareholder meeting will be livestreamed Thursday starting at 4:30 p.m. New York time. https://lnkd.in/etwcP5kK

Court decisions often have economic impact on businesses, and get really interesting when the company or an individual also is in the headlines. Economists address really interesting issues. For more insights from our experts, visit: https://lnkd.in/ggDUmth4 And consider joining us, and perhaps seeing your name in print: https://lnkd.in/ewhXW273

Excerpt: One of the world's richest men is fighting over how much he gets paid. As funny as that sounds, the battle over Elon Musk’s pay package is no joke.    Tesla’s annual shareholder meeting this afternoon will announce the result of the investor vote on Musk’s compensation plan (which was once valued at around $55 billion), but Musk is already claiming an early victory. Business Insider’s Grace Kay has the full rundown on what’s at stake and how it could play out.   On one side sits large investment firms that feel the package is a tad too rich for their blood. They also point to Musk’s chummy relationship with some Tesla board members (like his brother) for why the package shouldn’t get approved.    And they’re not alone. A Delaware judge voided the plan in January, deeming it an “unfair price.”   On the other side are Musk fans, of which there are many. Retail investors hold roughly 44% of Tesla’s shares, the highest mark among the 10 largest companies in the S&P 500.   From their perspective, the pitch is simple: Trust in Musk. The billionaire is a lightning rod for controversy, but he’s turned Tesla’s stock into a rocket ship — 2024 aside — making them rich. And for many shareholders, that’s all that matters.

Tesla shareholders have approved Elon Musk’s $56bn (£44bn) pay package. The proposal passed despite opposition from some large institutional investors and proxy firms. Onstage at the annual shareholder meeting in Austin, Texas, the billionaire described himself as “pathologically optimistic”. “If I wasn’t optimistic this wouldn’t exist, this factory wouldn’t exist,” Musk said to resounding applause. “But I do deliver in the end. That’s the important thing.” The approval does not, however, resolve a lawsuit on the pay package in a Delaware court, which some legal experts believe could last months. The judge invalidated it in January, describing it as “unfathomable”. Musk may also face fresh lawsuits on the deal, which would be the largest in American corporate history. Shareholders had first approved the bumper pay packet in 2018. “This thing is not over,” said Brian Quinn, a professor at Boston College Law School. The Delaware judge will scrutinise the vote and require Tesla to prove the process was not coerced or improperly influenced by Musk, Professor Quinn said. Image: A general view of the Tesla gigafactory in Austin, Texas, U.S., February 28, 2023 Pic: Reuters The judge had criticised Tesla’s board fore being “beholden” to Musk, saying the plan was proposed by a “conflicted board” with “close personal and financial ties” to its top executive. Shareholders also approved a proposal to move the company’s legal home to Texas from Delaware. Read more from business:House prices ‘rebound’Britons put record amounts into ISAsBoeing blocked from increasing production They also backed other proposals, including the re-election of two board members, Musk’s brother Kimbal Musk and James Murdoch, son of media mogul Rupert Murdoch. Shareholders did increase the level of investor control by passing proposals in favour of shortening board terms to one year and lowering voting requirements for proposals to a simple majority, despite board opposition to both. Tesla did not disclose the voting tallies, which are expected to be revealed in coming days. At least a half-million viewers watched the meeting on the livestream on X, which Musk also owns, and about 40,000 watched on YouTube. Tesla’s share price has dropped about 55% from its 2021 peak as electric vehicle sales have slowed. The stock closed up 2.9% on Thursday.

Although it couldn’t happen to a nicer guy, opposition to Elon Musk’s $56 billion package is a disgrace, as is the media’s coverage of the issue.   In 2018, Tesla’s board approved a pay package for Musk based on performance metrics that no reasonable person believed Musk could achieve. Unlike GM CEO Mary Barra, who gets a base $2.1 million salary just for showing up, Musk’s entire pay was based on hitting incentive targets.   Musk’s Tesla comp made him one of the richest persons in the world, which added to his lore and benefited Tesla’s investors because it underscored the value Wall Street placed in the company. At one point, Tesla was valued more than all the major automakers combined.   Along came some lawyers representing a single Tesla investor who owned all of nine shares in 2018. The lawyers argued that Musk’s pay package was excessive, not properly disclosed, and that Tesla’s board wasn’t sufficiently independent. A Delaware judge bought the argument and invalidated Musk’s pay package.   The lawyers who argued the case demanded a $6 billion fee for a legal outcome benefiting themselves.   CEO comp is mostly BS, a rigged game where “consultants” concoct bogus metrics to legitimize obscene payments. GM’s Barra has received more than $200 million for what Wall Street has deemed uninspiring leadership. GM stock is worth just slightly more than when Barra assumed command more than 10 years ago, and without a $10 billion buyback could be worth less.   By comparison, when Tesla’s stock was faltering, Musk resisted calls to initiate stock buybacks and notably has earmarked $10 billion to invest in AI. Stock buybacks were once illegal and still should be.   As for accusations that Tesla’s board isn’t sufficiently independent of Musk, Barra is chair and CEO of GM, an arrangement unanimously regarded as poor corporate governance. GM’s lead independent director is Patricia Russo, architect of what is widely regarded as one of the worst tech mergers ever.   ISS advised GM shareholders to reject Barra’s $28 million 2023 payday. “A vote against this proposal is warranted,” ISS said. “A pay-for-performance misalignment exists, and sufficient mitigating factors have not been identified for the year in review.” ISS noted that while the short-term incentives were based on financial metrics, the target goals were set below the previous year’s targets and actual performance.   Tellingly, the media has mostly ignored ISS’ recommendation to reject Barra’s pay package, but gleefully reported on the proxy firm’s Tesla recommendation.   If GM announced that Musk agreed to serve as the company’s CEO, investors would realize within minutes far greater returns than the cumulative value Barra generated in more than 10 years on the job.   https://lnkd.in/gsFGDE5x #tesla #gm #ceo #elonmusk

Elon Musk's pay package proposal by Tesla board has polarized corporates/investor stakeholders & is a fit case for a Governance case study! The $56 Bill performance pay proposal is linked to an increase in market capitalization (which itself can be manipulated). The stock price has not gone anywhere since 2020 and mkt-cap actually declined 54% from its Nov'21 peak. Many investors & local judiciary have voted against excessive pay, while many others vouch for the 'Musk' factor to take Tesla ahead. All this while BYD (their biggest Chinese competitor) is set to become the largest EV player globally. Could the pay proposal be linked to economic value added rather than market cap increase? your thoughts? #corporategovernance #executivecompensation #investing "MentorMyBoard"

How might a Delaware Court's recent ruling on Elon Musk's $56 Billion Equity Incentive Plan impact Tesla's future strategy and operations? On January 30th, the Delaware Court of Chancery invalidated the extraordinary performance-based stock option plan awarded by Tesla to Elon Musk, prompting Musk to express his dissatisfaction on social media and leading to speculation about potential changes in Tesla's state of incorporation. In this Stites & Harbison Client Alert, author Brian Cromer provides insights into this recent decision and its potential implications for Tesla, Inc. and its CEO. Read more below. #tesla #elonmusk #businesslaw