Elon Musk Pay Deal Voided - Should Tesla Reincorporate in Texas?

A Delaware court this week voided Elon Musk’s $55.8 billion dollar pay deal with Tesla. The voiding of these stock options erases about a quarter of Musk’s current wealth.
The judgement came in response to a shareholder lawsuit launched by Richard Tornetta who owned nine shares in the company. Judge Kathaleen McCormick found Tesla directors, who negotiated the pay package, were "perhaps starry eyed" due to Musk's "superstar appeal" and did not adequately inform shareholders.

Elon Musk announced after the judgement that he would seek to reincorporate Tesla in Texas, a state that he believes could be more hospitable to his way of doing business than Delaware. We’ll dig into whether that would work near the end of the video.

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[tdylan]

"This was above minimum wage at the time" was one of several very good jokes.

[Obamanamamama]

"a salary of $1 a year, which was below minimum wage at the time"

[Weaseltube]

TIL minimum wage in 1993 was between $1 and $2 million per year. Fascinating!

[Ashadow]

Here are some numbers just to put 55.8 billion dollars into perspective:

The cost of the Burj Khalifa, the tallest building in the world: ~1, 5B
You could buy more than 35 Burj Khalifas for Elon's compensation package.

The GDP of Iceland: ~26B
You could buy 2 years of Iceland's total economic output for Elon's compensation package.

Nintendo's profits from all Mario games ever sold: ~45B.
Elon's compensation package is bigger than 40+ years of profits from arguably the most iconic video game series in existence.

The compensation package of Stephen Schwarzman, head of Blackstone and one of the highest paid CEOs in America: ~253M
Stephen Schwarzman would have to work for over 200 years at his current income to reach the same level as Elon's compensation package.

[stuart]

20:10 "after all man cannot live on Stock options alone"😂😂😂😂 well played Patrick, well played 👏🏽👏🏽

[paulblack]

If a business is too loose for Delaware, you got problems

[jabberwockytdi]

Once worked at a Logistics centre in UK that had a contract to distribute a US product that had a shelf life. The US managers of the company in the UK would change regularly after all falling into the quarterly reporting trap. The stuff was pushed out to retailers on sale or return to manage the reporting then a chunk would come back as it passed it's sell by date and the manager would be fired, rinse and repeat until they gave up on the UK market as unprofitable....

[Mrinsecure]

This bizarre trend of overpaying CEOs has essentially become circular (and nearly tautological) in its justification. A well paid CEO is well paid because CEOs at good companies should be paid well, so obviously if you're paying your CEO well it means you're a good company. That's how that works, right?

[samsonsoturian]

Getting paid with options sounds like a infinite leverage glitch

[CrimsonLegacy]

In response to people talking about LLCs in different states being like the "Switzerland of the US", neither Delaware nor Texas are anything close to offering the level of privacy that Switzerland was famous for. Nevada is better in this regard, but... at least for people who are living outside the US, arguably the best tax shelter product available in the world now is a South Dakota Trust with the addition of Wyoming LLCs as needed. South Dakota and Wyoming have conditions on these entities that keep the identity of the true owner of completely hidden, including not reporting information to foreign governments or even the IRS. If you want to get really crazy, there's some people out there that claim that setting up an LLC in the country of Nevis and operating it here in the US is even more powerful than even Wyoming, and you'd be shocked that this is even legal once you learn some of the benefits Nevis LLCs purportedly offer.

[roegoleg]

Cult of personality, whether in business, politics or pop culture, is the reason we’re in this mess.

[Nick-gjje]

$19 billion for being a lawyer. Talk about obscene!

[Fuddleton]

Common Sense Skeptic is a great channel, good on you for mentioning them.

[mx]

Imagine if you as a worker argued you needed extra compensation and a stake in the business to properly do your job.

[joseguzman]

It’s incredible how we can watch your show and get such great detail and info on financial news stories and this channel is so much better than the newspaper or tv

[markdawson]

I love these deep dives into topics like this. I appreciate learning about the 'why' as opposed to what various people's opinions are.

[louisgerber]

Hi Patrick, Another of your very best programs. Thank you.

[karachaffee]

Musk's proposed compensation package is more than double the sum of all the profits that Tesla has ever made. In what universe does this make sense? Only if the principles of Hyperloopen Accounting Standards are applied can any sense be made of this ...

[ustadsami]

Elon Musk: Am considering taking Tesla private at $420. Funding secured.

😅

[seneca]

How the lawyers in this case get paid seems to give rise to perverse incentives too. Some enterprising lawyers might try to get some random shareholder (possibly by paying him) with 1 share to start a case just so that they can reap huge sums of money if they win.