What's Next for Elon Musk After Judge Voids Tesla Pay Package

1. KSKara Swisher0:00

   Elon Musk suffered a major loss in a Delaware court this week when a judge voided his $55 billion compensation package from Tesla. Uh, Judge Kathaleen McCormick, uh, called the compensation, quote, "An unfathomable sum," and it was unfair to shareholders and the process leading to its 2018 approval was deeply flawed. When you read through the documents, it really, (laughs) it was such a back-scratchy situation among the board members, who are all friends of his. Um, apparently one of them cried how, how much he loved Elon o- on it, which was kind of disturbing. Uh, Elon responded to the ruling on X, posting, "Never incorporate your company in the state of Delaware." Too late, Elon. And also, you should have had, uh, stock that ha- puts you in contro- control of the, uh, dual-class shareholders, which you didn't do either. Um, so too bad. You know, that w- if you had a time machine. Um, were you surprised by the ruling, first of all? The judge, let me, gives you more facts. The judge ordered Tesla to cancel the stock options award to Elon valued at about 51 billion, which is where most of his compensation is. Tesla's directors now have to figure out a new compensation plan that passes legal muster and keeps Elon happy and does it at an arm's length, which is, good luck with that, 'cause this board has shown itself to be a giant rubber stamp for Elon Musk. Um, we haven't heard if he's gonna appeal, but after a poll on X, he's now saying Tesla will hold a shareholder vote to incorporate in Texas. Um, h- uh, anyway, what does the ruling mean for Elon's quest to get that 25%?

2. SGScott Galloway1:24

   I've never, I've never heard of this happening or seen it happen. The fact that I've been on compensation committees of boards, I've never had a shareholder lawsuit against the compensation, the schematic you put in place. But to have a shareholder lawsuit, I've heard of them. Like Martin Sorrell had, uh, shareholder lawsuits constantly around his-

3. KSKara Swisher1:42

   Yeah.

4. SGScott Galloway1:42

   ... compensation.

5. KSKara Swisher1:43

   Mm-hmm.

6. SGScott Galloway1:43

   But to have it rejected... I mean, effectively, the shareholders decide who the board is.

7. KSKara Swisher1:49

   Mm-hmm.

8. SGScott Galloway1:49

   And so if the shareholders, uh, decide who the board is, who decides the compensation, then technically the owners of the company have decided, you know, what, what he or she gets. I'm not a... I don't believe you should limit compensation. I think we live in a capitalist society, and I don't like the idea. I, I do believe that we should have a more progressive tax structure. But anyways, that's another talk show. But this effectively says that this board is so incompetent and so conflicted that any decisions they make might not hold up in court because of the conflicts here. Even if you read the ruling, it, it, they talk about the size of it, but what they talk about is the conflicts and just how, uh, poor the rationalization was for giving him this. 'Cause as much as the compensation was, I mean, just to, just to be fair and try, try and call balls and strikes, him getting incr- an incremental 50 billion if he increases the sh- value of the company 500 billion, that's, that's not... I've seen compensation, uh, plans that on, you know, I mean, it's exceptional, but on a proportionate size or percentage of value increase, it wasn't outrageous. What this says is, you know what's gonna end up happening here? Uh, h- he's not gonna be able, uh, to reincorporate all this, all these threats, all these jazz hands, all this fake-

9. KSKara Swisher3:02

   Can you do that? Uh, when I was reading that, I was like...

10. SGScott Galloway3:04

    I'm not sure you can. I don't-

11. KSKara Swisher3:06

    Mm-mm.

12. SGScott Galloway3:06

    Um, you know, uh, b- I should have just said right off the bat, um, I don't, I don't, I don't know. But the no- the notion that... And then he's just, he's just so ridiculous. He says, he, he said, "I want to meet with shareholders and convince them to divest from Tesla or any of its companies ever. They are not welcome." Well, Elon, I don't know if you've heard or you understand corporate structure.

13. KSKara Swisher3:28

    Mm-hmm.

14. SGScott Galloway3:28

    But CEOs serve at the luxury of shareholders, not vice versa.

15. KSKara Swisher3:32

    Mm-hmm.

16. SGScott Galloway3:32

    You don't get to decide (laughs) who your shareholders are. The shareholders-

17. KSKara Swisher3:34

    Yeah.

18. SGScott Galloway3:34

    ... get to decide what CEO they want.

19. KSKara Swisher3:37

    Yeah. Mm-hmm.

20. SGScott Galloway3:37

    And if... Did you see the movie, did you see Pulp Fiction?

21. KSKara Swisher3:41

    L- long time ago. Yeah.

22. SGScott Galloway3:42

    Well, th- there's a scene in it where I think this him, this, this great actor, Ving Rhames, Ving Rhames maybe?

23. KSKara Swisher3:47

    Yeah, Ving Rhames. Yeah, he was in-

24. SGScott Galloway3:47

    He is-

25. KSKara Swisher3:48

    ... it on Mission Impossibles, yeah.

26. SGScott Galloway3:49

    Yeah. I think he is knocked unconscious. Uh, they put a gag ball on him, and they rape him.

27. KSKara Swisher3:54

    Oh.

28. SGScott Galloway3:54

    He had much more domain and dignity than this board has right now. This is, this board has been-

29. KSKara Swisher4:01

    Wow. (laughs)

30. SGScott Galloway4:01

    ... just molested.

Episode duration: 12:09