Delaware Chancery Court judge C. McCormick "boldly goes where no man has gone before" (page 2 (fn 2) of the opinion, citing Star Trek (really)) by rescinding Elon Musk's 2018 pay package after deciding that Musk controlled Tesla "at least as to" and "dominated the process that led to" the board's approval of his $55.8b performance-based equity-compensation plan.
The opinion states: "Swept up by the rhetoric of 'all upside' or perhaps starry eyed by Musk's superstar appeal, the board never asked . . . Was the plan even necessary for Tesla to retain Musk and achieve its goals?" The court answers its own question by stating that Musk's 21.9% ownership interest in Tesla alone "gave him every incentive to push Tesla to levels of transformative growth." On that point, the court seems to sorely misunderstand the typical motivations of public company founder/CEOs (especially one in the Magnificent Seven): they are in fact, way more than any court should be, hugely if not entirely motivated to boldly go where no man has gone before!
This pay package provided that motivation in droves. The court decided, among other things, that conditioning the pay package on majority of the minority shareholder approval was not enough because the proxy statement "inaccurately described key directors as independent and misleadingly omitted details about the process."
My take is that this story, of course, is not over. Musk will appeal. And Tesla will have to do some very important work to respond to the court's determinations around director independence and will probably need to appoint a couple new text-book independent directors to its board. More importantly, the board will need to figure out how to keep Musk -- a passionate, volatile, "Visionary Leader" -- sufficiently engaged and motivated, as Tesla seeks to continue to go where no companies have gone before.
The court, in my mind, makes some unfortunate leaps (or at least unfortunately drafted conclusions), including into what looks like human psychology, and therefore should prepare for its own record to be scrutinized.
Stay tuned.
https://lnkd.in/eUpbjfS7
#Tesla #boardofdirectors #corporategovernance #corporatelaw #corporatesecretary #independentdirectors
W
1wReading her thoughts as usual, old Mikey appeared as if from nowhere leading up Captain Pilkington's and his young mistress's second horses. The Blazers had run two good long points by midday and although both Theo and Captain Pilkington's chestnut were still full of running, old Mikey knew that the time to change horses was when this was still the case, rather than when they had begun to tire and were likely to make mistakes. This was good horse sense, as Emily knew. What she never knew and could never even begin to fathom was how old Mikey always anticipated that moment precisely. No matter where hounds had run and how far and in what direction the followers had followed, just as Emily would be wondering how much steam her horse had left in the boiler, along would come her wise and faithful old