{"id":10608,"date":"2024-04-18T12:35:49","date_gmt":"2024-04-18T12:35:49","guid":{"rendered":"https:\/\/topat10.com\/?p=10608"},"modified":"2024-04-18T12:35:49","modified_gmt":"2024-04-18T12:35:49","slug":"tesla-plan-to-re-run-vote-on-elon-musks-record-pay-deal-now-worth-45bn-has-a-fatal-flaw-warns-tulane-law-professor","status":"publish","type":"post","link":"https:\/\/topat10.com\/?p=10608","title":{"rendered":"Tesla plan to re-run vote on Elon Musk\u2019s record pay deal\u2014now worth $45bn\u2014has a fatal flaw, warns Tulane law professor"},"content":{"rendered":"\n

Tesla<\/a> could be setting itself up for a new legal challenge over Elon Musk\u2019s record compensation deal, a law professor at Tulane University warned.<\/p>\n

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On Wednesday, the company\u00a0urged<\/a>\u00a0investors to \u201crestore Tesla\u2019s stockholder democracy\u201d by ratifying in June the 2018 vote that awarded Musk the\u00a0largest pay package in human history<\/a>\u00a0after a Delaware court ruled the approval from six years ago\u00a0null and void<\/a>\u00a0over governance failings.<\/p>\n

By framing it as a moral obligation to ensure Musk gets what he had already earned rather than illustrating exactly how it will benefit the company, however, Tulane\u2019s Ann Lipton told CNBC this re-run could end up backfiring on Tesla. U.S. corporations do not exist to be fair to their CEO, but rather to enrich their shareholders.<\/p>\n

\u201cThey don\u2019t actually have to pay him for past work, and that\u2019s exactly the issue,\u201d Lipton said<\/a> on Wednesday. \u201cThat kind of generosity that is unnecessary could easily be considered waste, legally, and therefore can only be approved by a unanimous shareholder vote.\u201d<\/p>\n

In other words, awarding him a $45 billion comp deal\u2014down from $56 billion previously due to the drop in Tesla\u2019s share price\u2014risks running afoul of laws prohibiting boardrooms from gifting away assets that belong to their investors.\u00a0<\/p>\n

A Delaware ruling in the case of\u00a0Saxe v. Brady<\/em>\u00a0from the 1960s sets standards for what reasonably constitutes\u00a0excessive and unreasonable waste and spoilation<\/a>, an act that is only legal if approved by every single shareholder.<\/p>\n

\u201cLet\u2019s say a company decides \u2018I want to light my assets on fire, there\u2019s no benefit to the company, I just want to do it cause it\u2019s fun\u2019,\u201d she continued. \u201cYou would need a unanimous shareholder vote for that.\u201d<\/p>\n

Tesla\u2019s fan base fracturing into two warring camps <\/h2>\n

The board could make a case that restoring Musk\u2019s pay package would ensure the totemic entrepreneur doesn\u2019t quit as its CEO. Yet that has become a\u00a0tougher sell<\/a>, not just because the Tesla\u00a0investor base has split<\/a>\u00a0into pro-Musk and anti-Musk factions.<\/p>\n

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It only took this post to have him threaten assault on me. Wild. Is this even allowed on X? I don’t even know anymore with Elon’s wild west approach.<\/p>\n

Yes, spitting on someone in most places is considered ‘simple assault’ or ‘battery’. https:\/\/t.co\/WXaSrxZRLO<\/a> pic.twitter.com\/7e3JLXIxvX<\/a><\/p>\n

\u2014 Fred Lambert (@FredericLambert) April 17, 2024<\/a><\/p><\/blockquote>\n

One issue is that Musk divides his time between running Tesla and his myriad other business interests. These now includes serving as chief technology officer at his social media company X since late 2022, as well as CEO of Grok chatbot creator x.AI Corp, his latest endeavor, since March of last year.<\/p>\n

With Musk\u2019s full attention not focused on Tesla, the\u00a0wheels have begun to come off<\/a> the carmaker\u2019s growth story. Vehicle sales are declining on a year-on-year basis for the first time since the COVID pandemic erupted, and like-for-like earnings are\u00a0expected<\/a>\u00a0to shrink 40% when Tesla reports on Tuesday. The company also said goodbye this week to\u00a0over a tenth<\/a>\u00a0of its staff, including veteran executive\u00a0Drew Baglino<\/a>.<\/p>\n

Pointing to the share price plumbing 52-week lows this week, Bloomberg columnist Matt Levine said it was \u201ca bit of an odder ask\u201d to grant Musk billions in retrospect for having achieved market cap milestones in the past that no longer apply following a slump in the stock.\u00a0<\/p>\n

\u201cAs I previously wrote: \u2018it is possible that the rule of this case is that Tesla is not allowed to pay Musk $55.8 billion, no matter what its shareholders think, no matter how many of them vote to approve it in a fully informed vote,\u201d he argued on Wednesday.<\/p>\n<\/div>\n