Tesla Asks Shareholders to Approve Elon Musk's Multi-Billion Payout | Pivot

1. 0:00 – 0:30

   Tesla reopens Musk’s pay vote and proposes moving incorporation to Texas

   1. KSKara Swisher0:00

      Tesla is asking its shareholders to reinstate that multi-billion dollar compensation package for CEO Elon Musk, the one that was rejected by a Delaware judge as unfair earlier this year. The board says it still stands behind the pay package. Of course it does, 'cause they get paid. And that, uh, vote in favor at the company's annual meeting would, quote, "restore Tesla's shareholder democracy," again, but they're pulling in all the re- I can't believe First Amendment wasn't shoved in this statement. Shareholders will also be voting on Elon's plan to move Tesla's corporate home from Delaware to Texas. So it's m- moot the Delaware decision. This is what

2. 0:30 – 1:00

   Why approval is likely: shareholder loyalty and “key man” dynamics

   1. KSKara Swisher0:30

      they said they were gonna do. They will do it. Uh, he'll get his money back. They'll win on this one. Tesla shareholders very much like Trump, uh, Truth Social. Although Tesla's an actual business, uh, still will bid it up no matter what he does. So they wanna pay him. Maybe he's worth it. If he d- if the stock does well, if he can turn it around and get better cars and, you know, get the p- economic prospects of Tesla doing well, he's certainly capable of it compared to Donald Trump. Uh, but, um, you know, the argument seems to be they may not have been aware

3. 1:00 – 1:40

   Setting the context: Tesla’s weak 2024 performance and the shrinking headline payout

   1. KSKara Swisher1:00

      of what was behind the creation of pay package, but now they are. Um, I think they will approve it. I think most people think they will. Um, I, just for people to be aware, Tesla's, uh, stock performance has been more than lackluster in 2000, uh, '24. The shares have lost 38% of their value so far. Elon's pay package was worth 56 billion in January, now it's closer to 45 billion. Um, he is the key man in this thing at this point. It probably shouldn't be. Um, and he wanted voting control back in January. Uh, he'll get that probably. It's, it's his company to do with what he wills, what he wants to. I don't know. I don't... It's capitalism. Nice to meet you. Thoughts?

4. 1:40 – 2:19

   Galloway: the pay figure is misleading because it’s options valuation, not cash

   1. SGScott Galloway1:40

      I think that's right. I, I think the, uh, uh, I do think his pay package will be reinstated. And the, the thing that Aswath Damodaran, my colleague at Stern, pointed out that made a lot of sense to me is we see the headline number, 56, now 45 billion.

   2. KSKara Swisher1:52

      Mm-hmm.

   3. SGScott Galloway1:53

      And the delay, by the way, if, if he were to exercise and sell all his shares, I don't know if he was planning to do that, it's cost him 10 billion even if it's reinstated. But that's the headline number. But when they actually devised and awarded the compensation package, it was on options on stock when the stock was far below this. Meaning that if you valued his actual compensation package when the award was made, it was dramatically less-

   4. KSKara Swisher2:19

      Mm-hmm.

5. 2:19 – 3:20

   A simple analogy: how options can balloon after a stock run-up

   1. SGScott Galloway2:19

      ... than 45 billion. And as much as I hate to in any way defend or acknowledge the point, he wasn't co- he wasn't paid 45 billion. He was given options much less than that. And because the stock skyrocketed, he's, he's registered this enormous windfall. So I'm not sure it's entirely fair to say should the board be paying him 45 billion. If, if Vox gave us, uh, let's say $10 million worth of options-

   2. KSKara Swisher2:46

      Mm-hmm.

   3. SGScott Galloway2:46

      ... options that had a value of $10 million, and you value options based on their upside potentially using, like, the Black-Scholes method, and then Tesla's stock went up... I'm sorry, and then Vox's stock went up 10x-

   4. KSKara Swisher2:58

      Mm-hmm.

   5. SGScott Galloway2:58

      ... our shares would probably be worth somewhere between 100 and 200 million. And people might say, "Well, these, these podcasters aren't worth that."

   6. KSKara Swisher3:05

      Yeah.

   7. SGScott Galloway3:05

      But that's not the, that's not the number. You look at the initial compensation or value of the options when they were awarded. So I think it'll be reinstated, and I do think it's a little unfair to look at the headline number, 'cause what we're not taking into account is the fact that the stock skyrocketed after they won the auction.

6. 3:20 – 4:02

   Governance indictment: a board “in his pocket” and Delaware court’s warning

   1. KSKara Swisher3:20

      Y- y- absolutely. Again, I think the point the Delaware court was making is a good one. This board is in his pocket, and that's w- as many corporations are, FYI. He, they're in, particularly-

   2. SGScott Galloway3:29

      Yup.

   3. KSKara Swisher3:29

      ... in his pocket. This board-

   4. SGScott Galloway3:30

      Agreed.

   5. KSKara Swisher3:31

      ... is, it benefits from him. They party with him. You know, it just shows-

   6. SGScott Galloway3:34

      Yeah.

   7. KSKara Swisher3:34

      ... corporate boards.

   8. SGScott Galloway3:35

      Mm-hmm.

   9. KSKara Swisher3:35

      And this is a particularly, um-

   10. SGScott Galloway3:37

       Yeah.

   11. KSKara Swisher3:37

       ... very compromised one that'll do his bidding.

   12. SGScott Galloway3:40

       Agreed.

   13. KSKara Swisher3:40

       And, and that's, to me, that's the message here, is I s- I think, you know, the Delaware court is right, and these, this terribly compromised board has every right to reward him because he's it. He's the one. He's the guy. Um, again, grotesque? Certainly. Worth it? He, the stock has been up under his leadership, so they've all benefited. Um-

   14. SGScott Galloway4:02

       Mm-hmm.

7. 4:02 – 4:48

   Business fundamentals vs. personality drama: tired product, brand damage, tougher market

   1. KSKara Swisher4:02

      ... in this case, they've all done very well with his, whatever his antics may be. Um, I do think they're facing a lot of challenges, as we've talked about. And I think we were, we, borne out to be right even though we got slapped by all the Stans. Um, which is, let's look at the company itself. The product is tired. Um, the toxic behavior is hurting the brand. Um, there's competition, and it's a tough market. So that's really what people should be looking at with this company more than, uh, anything else. Um, and if they, if he does really well, they should pay him a lot. If they don't, I, I, I feel like you should be paid based on your thing. But the way they rewarded this is r- the Delaware court is 100% right. What a, they should go after everybody. E- every company often is like this. This just happens to be the most egregious example of that, presumably.

8. 4:48 – 5:08

   More bad signals: worst S&P performer, delivery miss, and layoffs

   1. SGScott Galloway4:48

      But so far, year to date, the, Tesla is the worst performing stock in the S&P.

   2. KSKara Swisher4:52

      Mm-hmm.

   3. SGScott Galloway4:53

      I mean, out of 500 stocks, it's the worst performing.

   4. KSKara Swisher4:55

      Yeah.

   5. SGScott Galloway4:55

      And also, they had their biggest miss in terms of estimates for vehicle delivery.

   6. KSKara Swisher4:59

      Yeah.

   7. SGScott Galloway5:01

      Uh, so I think this stock has a long way, uh, to go down. They've laid off 10% of their workforce, which is probably-

   8. KSKara Swisher5:06

      A good idea.

   9. SGScott Galloway5:07

      ... probably the right move.

   10. KSKara Swisher5:08

       Mm-hmm.

9. 5:08 – 5:44

   Compensation as the hardest board problem—and a governance “signal” from the ruling

   1. SGScott Galloway5:08

      But there's a lot of... The, the hardest thing, uh, about being on a board, I find, and tr- and more broadly probably about management, is compensation.

   2. KSKara Swisher5:17

      Mm-hmm.

   3. SGScott Galloway5:18

      And in this instance, it's, it's okay. (laughs) How do we, how do we try and justify the compensation here? What I do think this will have an impact on is I don't think he's gonna be issued so many shares that he controls the company are a new class of shares. I think that this has basically sent a signal to the board-

   4. KSKara Swisher5:36

      Mm-hmm.

   5. SGScott Galloway5:36

      ... that there are, there are other, there is other governance-

   6. KSKara Swisher5:39

      Mm-hmm.

   7. SGScott Galloway5:39

      ... and you can't just do ridiculous things that are clearly off market.

10. 5:44 – 6:37

    Kara’s bottom line: Tesla’s challenge is execution, not Musk’s pay—robotaxi hype won’t be enough

    1. KSKara Swisher5:44

       Because you're benefiting, and they're benefiting. That journ- that second Journal piece was so, like, eh, revelatory, what the fix is in for this guy. Again, he's done really well with the stock. I'm gonna... You know, I do not compliment Elon Musk. But the problem with this company is not, uh, that he is not, uh, paid enough. It has to do with the, the, you know, stop focusing on Twitter and focus on get, doing better cars. It doesn't actually, it doesn't even matter now 'cause there's too much competition. There's too much consumer sentiment against him. It doesn't matter. He, unless he comes out with the best car ever. And ro- no matter how many jazz hands he puts around, robotaxis or anything else, I would be surprised if he can pull a rabbit out of a hat here. He had his time. And we'll see, y- you know, it, it's a good car. It's a good car. But there's lots of good cars now. Um, and that's the way it is. He waited, he, this is so inevitable what's happened to him. And it's a business story rather than an Elon Musk story.

Episode duration: 6:37