Elon Musk Wins A Lot By Alot

AP Photo/Ebrahim Noroozi

Elon Musk won--by a huge margin driven by the votes of retail investors, not the massive financial houses--a vote to reinstate a compensation package that had been approved by shareholders previously but had been struck down by an activist judge. 

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The package was unusual--Musk decided to forego any compensation for years in exchange for an incentive package based on ridiculously ambitious goals for the increase in stock price. Musk hit and then exceeded those targets by years, and he was awarded stock options worth tens of billions of dollars. 

A Delaware judge struck down the package based on a novel legal theory: Musk is already too rich and despite the shareholders having approved the package, he simply didn't deserve so much money. 

You know that the judge has an odd outlook when she begins her legal decision with “Was the richest person in the world overpaid?” 

That really is an odd framing, and the shareholders of Tesla answered her question yesterday with a resounding "No."

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The big investment houses voted to claw back the money, but the retail investors who have placed big bets on Musk's leadership voted overwhelmingly to confirm the original pay package, despite the fact that it theoretically (but no in reality) takes money out of their pockets. 

In fact, as soon as the results of the election were informally announced by Musk, shares of Tesla shot up, not down. 

There's a simple reason for that fact: shareholder value is driven by the potential for future growth of the company, and shareholders (rightly) believe that Elon Musk brings unique value to the company above and beyond what any other leader possibly could. 

The Judge sees Elon Musk as "the richest man in the world." Shareholders see Musk as the man who is making them rich, and believe that losing the Elon Musk touch at Tesla would be tantamount to wounding the company and throttling future growth potential. 

Clearly, they have a point. Musk literally lived at a Tesla factory for years, working longer, harder, and smarter than anybody else, and no sane person could suggest that his leadership didn't turn the company into a juggernaut. 

Don't believe that Musk is magic as a leader? Then, explain SpaceX's success. Musk has turned a company that barely survived into the largest space power in the world--one that will put up 90% of all the mass sent into space this year. Combine every other entity, private or government, with SpaceX and you would barely notice if they disappeared off the face of the Earth. 

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Elon Musk, love him or not, is under attack for political reasons. That's it. Period. End of story. 

Ironically, the shareholder vote will have no direct impact on the court case in Delaware. The judge is not bound by the decisions of the shareholders, and she, so far, has not shown any interest in what shareholders think. 

This is why the shareholders in a related vote decided to move the incorporation of the company from Delaware, which used to be known as a corporation-friendly state, to Texas. 

Even basic, cut-and-dried matters of corporate law are now driven by left vs. right politics. 

Ugh. 

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David Strom 12:40 PM | July 23, 2024
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