Earlier this week, a Delaware judge voided Elon Musk’s $55 billion pay package after a Tesla shareholder, who owned just 9 shares, filed a lawsuit claiming that the package was excessive and unfair – despite the fact that it was based on milestones which the board and 80% of shareholders agreed upon, and which Musk achieved.
The judge in the case, Kathleen McCormick of the Delaware Chancery Court (in which there is no jury), agreed with the shareholder, Richard Tornetta, that Tesla’s board lacked independence in crafting Musk’s pay – and will now have to go back to the drawing board to put together a new compensation plan.
So much for capitalism, right?
Never incorporate your company in the state of Delaware
— Elon Musk (@elonmusk) January 30, 2024
The move prompted Musk to create a poll asking if Tesla should move its state of incorporation from Delaware to Texas, which more than 87% of his 170 million followers agreed with.
Should Tesla change its state of incorporation to Texas, home of its physical headquarters?
— Elon Musk (@elonmusk) January 31, 2024
So much for the judiciary…
After the shocking ruling, X user KanekoaTheGreat began digging into Judge McCormick’s past, revealing yet another partisan activist sitting on the bench.
Not only did she come from a Democrat-allied law firm, she was nominated to her position by Congressman John Carney, who held a gubernatorial campaign event with Biden at said firm.
From Kanekoa’s post on X:
Before becoming the head of the Delaware Chancery Court, McCormick worked at a Delaware law firm called Young Conaway.
This firm and its employees have been major donors to President Joe Biden for decades.
In 2016, Hunter Biden hosted a gubernatorial campaign event for Congressman John Carney, with then-Vice President Joe Biden as the guest speaker.
This event took place at the Law Offices of Young Conaway in Wilmington, Delaware.
Carney, a close friend of Joe Biden for the last four decades, later became governor and nominated Kathaleen McCormick, a partner at Young Conaway, to her position on the Delaware Chancery Court.
In a March 2018 email, Hunter Biden claimed to personally know every judge on the Delaware Chancery Court while threatening legal action against his Chinese business partners.
“I will bring the suit in the Chancery court in Delaware – which as you know is my home state and I am privileged to have worked with and know every judge on the chancery court.”
After Elon Musk purchased Twitter with the stated goal of restoring free-speech, President Biden called for a federal investigation into Musk on the podium at the White House.
Following this, the Biden Department of Justice, Securities and Exchange Commission, and Federal Trade Commission initiated legal actions and investigations against Tesla, SpaceX, and X.
And of course, receipts beyond her publicly available career path:
Thank you to @MarcoPolo501c3 for uploading the Biden emails into a searchable database at https://t.co/DvkQSMubOD.https://t.co/SNkNzDC0Wphttps://t.co/VVWhfqqPfFhttps://t.co/vLgPguOGw7https://t.co/vnRr9lZBrQ pic.twitter.com/M53FZphFUK
— KanekoaTheGreat (@KanekoaTheGreat) February 1, 2024
Meanwhile, X user ‘Teslanomics’ summed the situation up brilliantly;
Let me get this story straight.
So Elon’s 2018 compensation package was approved by ~80% of Tesla shareholders during a time the company’s valuation was ~$60B ($20 per share). The plan would require him to grow the market cap by $50B increments with the first milestone starting at a $100B valuation with the final milestone being $650B, in addition to aggressive revenue, pretax profit growth targets that many thought would be impossible, especially knowing the company was facing bankruptcy dead in the eyes during this time.
If Elon were to hit all the milestones, he would then be granted this full $55B compensation package that gave him stock options to purchase Tesla stock at a heavily discounted price and the stock could not be sold for another 5 yrs after exercising the options to prevent an “exercise & run”.
He hit all the milestones and created real value for the company & its shareholders (today, the valuation of Tesla sits at ~600B, a 10X from the year the comp package was approved, and a world class financial war chest). Also, btw, if Elon were to not hit these milestones, he would have been paid essentially nothing.
Then in 2019, a shareholder named Richard Tornetta (who held 9 shares of Tesla) filed a lawsuit claiming that the compensation package was excessive & unfair, claiming the board had not acted in the best interest of its shareholders.
Then today, the Delaware judge named Kathaleen St. Jude McCormick voided this compensation package claiming it was excessive and the process for coming up with Elon’s comp plan wasn’t independent bc he controlled the BOD and the directors who approved the plan weren’t truly independent. Further claiming that the shareholders who approved the comp plan weren’t made aware of this controlled relationship.
Wow… you really can’t make this stuff up, this is literally what just happened.
Personally, I’m not so concerned about Tesla bc I believe the board & shareholders will approve an even better & more aggressive compensation package for Elon (e.g. include the $55B 2018 comp that he deserves, give him 25% voting share, include milestones for Tesla to become the largest valued company in the world & more, etc.) which will ultimately keep Elon motivated to stay at Tesla and build the future of AI & robotics within the company.
However, my main concern here is the fundamental foundation of capitalism that America is built upon. The CEO of a company was incentivized with a compensation package & it was approved by its shareholders to create value and he did. He hit all the milestones that were laid out, it wasn’t a pump or dump, and he didn’t steal or deceive shareholders. He simply went all in, put his blood, sweat, and tears into building the best products to change the world for the better, which created tremendous value for the ones that believed, invested, and stuck through. And now a judge has retroactively removed the reward for the leader that got the company to where it is today.
Why would any CEO/founder in America want to work hard, when the result of his or her hard work can easily be taken away unfairly like this?
What happened today, is very wrong and if nothing is done to fix it, it will crush the entrepreneurial spirit & heartbeat that America was originally built upon.