Musk received a piece of bad news today.
His year-end bonus is gone.
And this sum of money is worth about $56 billion, and losing it will make Musk's wealth fall from the top of the human list to the third.
And if you look at Tesla's market capitalization, the money Musk lost overnight is even about the same as Tesla's total market value in 2018.
And this story has to start in 2018.
Musk is a gambler.
Not only does he often dare to introduce unprecedented technology with first principles, but he also devotes his life to unprecedented. Even he doesn't know if some of his explorations will pay off, and he needs to be willing to gamble.
Even in terms of salary, he took a big gamble.
If the bet is won, Tesla will become one of the most valuable companies that mankind has ever seen, and if the bet is lost, Musk may really have nothing.
Musk in 2018 looks far less proud than he is now. At that time, Tesla was mired in the production hell of Model 3, and the fully automated production promoted by Musk encountered twists and turns in practiceWith a starting price of $50,000 also far away, the world is skeptical about Tesla's continued profitability, and even pointedly pointed out that Tesla could go bankrupt.
Whether it's the famous Sleeping Factory meme or the shocking Tesla bankruptcy picture, it happened during this period.
And for Tesla in the storm, the board of directors of Tesla at that time came up with a way that you and I may also think of: motivate Musk.
So,In January 2018, Tesla announced Elon Musk's bold CEO New Long-Term Special Performance Award, which is a 100% risk performance award that ensures that he will only be rewarded if Tesla and all of its shareholders perform well. Reaching the highest market cap milestone requires 10x***.
You could think of it as a hellish game, and Musk has to beat 12 specific levels to unlock a portion of the rewards — the equivalent of 1% of Tesla's**. Take this final step in motivating performance as an exampleIt requires Musk to lead Tesla to a market capitalization of $650 billion, which is equivalent to increasing Tesla's market capitalization by 10 times and directly entering the top 5 of American companies in terms of market capitalization.
After this news was released, the United States ridiculed that these goals were completely impossible.
In March 2018, Tesla announced that shareholders had approved Musk's new long-term performance bonus plan, and data at the time showed that 73% of Tesla shareholders approved the plan.
It all started like a fairy tale, but one of the remaining 27 percent of Tesla shareholders who didn't support it felt like a fairy tale.
The shareholder's name is Richard Tornetta, in June 2018, he filed a lawsuit in Delaware (Tesla's place of incorporation) court, asking for a rejection of the board's compensation package for Musk, on the grounds that the plan was not fully communicated to shareholders and was a waste of shareholders' money.
An interesting detail is that when Tonetta filed the lawsuit against Tesla, he only owned 9 shares of Tesla**At that time, no one noticed this small lawsuit.
On the other hand, I don't know if Musk is talented, or if this matter is really simpleWhat seemed difficult to reach the sky before, in fact, he only did less than a thousand days ......
In 2020, Musk unlocked the first part of the performance reward program, and in December of that year, Tesla actually cleared the customs directly, with a market value of $650 billion, a 10-fold increase in two years, and even directly pierced the $1 trillion ceiling in 2021.
This kind of spectacle, not to mention in the history of human automobiles, is rare even if it is extended to the history of human wealth, not only has the value of Tesla** held by Musk increased to more than 100 billion US dollars, but also according to the agreed remuneration plan, it can also get another 56 billion US dollars, a total of 93.9 million **rewards.
That's a high pay never seen in human history – Amit Batish of executive compensation research firm Equilar estimated in 2022 that Musk was paid about six times as much as the 200 highest-paid executives in 2021 combined.
Forbes magazine writes directly: The electric car maker's 2018 compensation package is much higher than that of any executive to date.
But Delaware Judge Kathaleen St. McCormick j.McCormick) on Tuesday made the pay no longer exist.
In addition to Tonetta, those who believe that Musk's compensation package is unfair include the California Teacher Retirement System Pension ** Calstrs ) many and ** consulting firms, their main position is,Tesla's board of directors has never told shareholders that these goals are easier to achieve than the company admits.
Tesla's executives at the time took a different shot in court, with Robyn Denholm, then chairman of Tesla's board of directors, testifying that the compensation package was set up to allow Musk to focus on Tesla.
Tesla's directors argued in a week-long trial that the company paid to ensure that one of the world's most dynamic entrepreneurs continued to focus his attention on the electric car maker.
In his testimony in the case, Danholm said: It was to motivate him to achieve something bold and to put his time and energy into it instead of his other interests. 」
And the prosecution expressed its own incomprehension, they believe that when Musk's vital interests are already highly bound to Tesla, this additional incentive is not necessary, becauseMusk already owns about 22% of the automaker**
Jesse J., an expert and professor on executive compensation at Harvard Law School, said that while Delaware courts sometimes allow boards to pay executives modest gifts based on past performance, it is easy for shareholders to sue over such payments to Musk because it is a waste of corporate resources.
Musk has created value for shareholders. If they now write him a check for $10 billion in recognition of his past performance, what exactly do shareholders get out of it? 」
What do you get? Musk knows.
When he made a statement in court, he repeatedly emphasizedIf you make money for yourself, you will benefit all mankind.
In November 2022, Musk stated in a court statement that the money would be used to fund interstellar travel.
It's a way to get humans on Mars, so Tesla can help make that happen. 」
Colonizing Mars is an expensive endeavour, and Musk believes he has the moral obligation to put his wealth to work towards it, and Musk sees the payment he receives from Tesla as a means to fund this mission.
He also said that about half of my money is going to solve problems on Earth, and the other half is going to help build a self-sufficient city on Mars to ensure the continuation of life (of all species) in case the Earth is impacted. When a meteor like a dinosaur or World War III happens, we destroy ourselves. 」
But when Tesla Chairman Danholm was answering a question about what Musk was doing with the money, she said Honestly, I don't know how much interstellar travel will cost. It's not my hobby.
The sentiment clearly did not move the judge, and Judge McCormick wrote in his 201-page verdict: "The scale of the largest compensation package ever made is unbelievable — an unfathomable sum — that seems to have been made to help Musk achieve what he believes in 'creating a better future for humanity.'" 」
This is unfair to shareholders. 」
McCormick also wrote that Musk's team was unable to prove that the shareholder vote was fully informed because the proxy statement inaccurately described key directors as independent and misleadingly omitted details about the process.
Judges questioned more than motives about the process by which the plan was passed.
A series of features of Musk's relationship with Tesla and its directors have given him enormous influence over Tesla. In addition to having 21In addition to his 9% stake, Musk is the quintessential Superstar CEO, having held some of the most influential corporate positions (CEO, chairman, and founder), having close ties to the directors tasked with negotiating on Tesla's behalf, and leading the board. 」
The board, swayed by the 'all-round**' rhetoric, or perhaps fooled by Musk's superstar appeal, never asked the $55.8 billion question: Is it necessary for Tesla to keep the program and achieve its goals? 」
McCormick said the process by which Musk's compensation package was ultimately approved was deeply flawed.
This is because,At that time, Tesla's decision-making level was full of Musk's friends, subordinates and fans: He has a 15-year relationship with Ira Ehrenpreis, Chair of the Compensation Committee. Another member of the Compensation Committee in the working group, Antonio Gracias, has had a business relationship with Musk for more than 20 years, and the personal relationship also allows him to regularly spend holidays with Musk's family. 」
And some of the details listed in it are also hilarious, such as the court said that Tesla's general counsel, Todd Maron, who drafted most of the documentsHis admiration for Musk brought tears to his eyes as he testified
In fact, Malone is the main intermediary between Musk and Tesla's committeeIt's unclear which side Malone thinks he's on
Eventually, McCormick ruled that Musk's compensation package had been reached in an unfair manner, and later added that the plaintiffs had the right to revoke it. 」
Are the richest people in the world overpaid? McCormick asked as he made his decision.
He controlled Tesla (at least as to this transaction, Musk controlled Tesla).
In fact, it is Musk himself who foresees this verdict the most.
Back two weeks ago, he suddenly started a discussion on X about Tesla's control.
He said, "It makes me uneasy to be a leader in artificial intelligence and robotics without about 25% of Tesla's voting control." I'm influential enough, but not too big to be overthrownUnless I have more than 25% control, I'd rather build a product outside of Tesla. 」
He also said, I don't want to control it, but if I have so little influence over the company at this stage, I might be voted out by some random shareholder advisory firm.
When someone suggested that he change Tesla's shareholding structure, Musk said that he would wait for the Delaware verdict.
And today's verdict has become a good opportunity for Musk to control Tesla more deeply.
In small terms,Tesla will need to re-establish a compensation incentive plan for Musk. Wedbush analyst Dan Ives said: It was a headache decision in the eyes of Wall Street, and now it gives the board the ability to develop a new compensation package for MuskThus locking Musk into Tesla by 2030.
And in the big picture,Musk wants to achieve a hierarchical voting power structure by changing Tesla's place of registration.
After buying Twitter, he moved his company from Delaware to Nevada.
And today, after complaining in a row that such a verdict is an insult to Tesla shareholders and a parasitic load for managing a public company, he directly sent an x saying that if you want shareholders to decide on affairs, I recommend registering in Nevada or Texas .
Then a poll was released asking him if he should change Tesla's place of registration to Texas, where it is headquartered, and 90% of the 250,000 users voted yes within an hour.
Regardless of Musk's appeal against this verdict, we can see that:
The world's once richest people will deepen their grip on Tesla like never before, and then attack the extremes of human wealth in a newer way.