Transcript
Oh yeah. Hey ho Get worse and worse live. From a Kimball scented. ESG, dude, ranch oh, is yet another woke Wednesday edition of business pants. Joined as always by analysts whole map discarded. Yeah. Might be our wokest Edition yet really why? I don't know why. I mean, we're about to spend 17 hours, talking about a pay package for a man walking in today's fake particle board called January 31st 2024, the soap opera of Tesla, CEO Elon Musk, and how it proves definitively that we are, right? Yeah, yes. How many? Like, there's there's so much that we're right about all the time. Our show today is being sponsored by free flow analytics. The only ESG data platform to measure. Real bored influence and diversity power gaps. Listen to that crowd. Hey really, they're not only do they love free floating analytics but they love that we're right. Before we get into the big story, I the one data point I've been saying over and over and over again since we launched our platform. I don't even know when we did that last summer. Was yeah, we last apply for July and the podcast four years ago was that well the data point that I'm referring to though is relatively new for us, is this that there's no other Enterprise and other research organization or their data provider? No other ESG, whatever cares. Nobody else. Quantifies the power. Of board members. Yeah, accurately. No one. Everyone knows that Elon Musk is dominant figure in control, a dictator blah blah blah. But we're the only ones who provide quantitative proof of that fact by setting an actual number on it with that method with methodologies behind it. We're not just strive asset who just hates women. We have a methadone methodological approach behind and it says in our database. Again this is not a political stance. This is just This is just analyzing the data and articulating that set of data, which is that Elon Musk controls. 70% aboard, influence at Tesla? That's it Yeah, it's not an agenda. Not only is that it but there are nobody else can do that 30. They're over 30 academic research papers that we use. It's not like a made-up. It's, I mean, like, 71% versus 72% that's like, you know, like that's sort of a false Precision but it is based on Two decades of research that's been going on. Is that like a made-up thing? And you just the only ones who've done it, you can't go to NASDAQ, you can't go to stay analytics, ISS msci. You can't get this quantitative approach to actual board power. So, again, You know, people can say they look that well they know that Elon Musk is in control. We don't you don't know. It's a qualitative statement and we're trying to get away from that, we're making quantitative statements, which is that he controls 70% of board influence at Tesla. And why does it matter? Because, you know, if you were an investor who were starting to get into Tesla after it became very well known and after its its stock price had searched there might be some you might have some concern in the long term that this boards by a single entity. There's no counterbalance to his power and you might, you might wonder, can they sustain this share price? This is just an example of how you could use it can this company just sustain its share price when when there's clearly One Lunatic CEO in charge who has no checks and balances and he also runs seven other companies, right? Well it's also fascinating to find out things like and we talk about it all the time. But you might think that the CEO of a company is the most powerful person at the company but sometimes it's totally not true. And Walgreens case, Stefano pessina is the most powerful person of the company. He drives out raws Brewer, And you'd think that Roz Brewer as a CEO would have been the most powerful, but but you can quantify it. That's the point and we're about to because the more I thought that was a Chancery Court. All right, let's get to it. Oh, that's good to know where our story wrote Our Story. Here's the headline judge voids Elon musk's 56 billion dollar Tesla compensation package. I mean there used to be the day not too long ago when we saw 56 million dollar PayPal packages and it was pretty shocking. I mean it was shocking amount of money. Shocking one individual course, it's still shocking. So that's Delaware. You you just references? Matt Delaware Chancery Court Chancellor like that. Yeah, Chancery Champaign. It's not Kathleen. It's Kathleen. McCormack invalidated Tesla, CEO, Elon, musk's payback package ruling that he quote failed to prove that it was fair. Oh, he fails now. Before we get into it, for those of you who don't know, I just want to recap the history here in 2018 musk, agreed to be Tesla CEO. And with the PayPal package included 20 million stock options. In 12 trench, that would vast as the company met more than a dozen miles stones. And at that time, their estimated to be worth about 5 5, Shareholders sued musk and Tesla to rescind. The pay package arguing that it was excessive and that the company's board breached. Its fiduciary duty in a proving it. So that's where this whole thing starts from. Yeah. And and the Tesla, the musk case has been that 70% 73 percent of shareholders who were not named musk approved, the package and they're very proud of the fact that like look, this was a proved by shareholders but it was a not approved by all shareholders and B. If you exclude the three or four largest shareholders, who basically hold everything in vote, Yes on everything. No due date was actually barely approved. Barely approved, By anybody, everybody thought it was excessive and there were we wrote about it like Ad nauseam afterwards, including you? And I, we were back at the mothership we had they believe we did a ESG. Now podcast, we've been talking about a year since I mean, because even talking about for years even on his face value, it is absurd because even if you granted him 10% of this package, give him 5.6 billion dollars. Think of the other to this shareholders, you know, Point think of the other the huge amount the huge pile of cash. You could invest into Tesla itself to make the company better for shareholders, right? I mean, just kind of goes without saying that there's this is an absurdity on top of an absurd pile of a certain. Well, I mean they didn't pay him cash, they pay him in dilutive stock, okay? Well every shareholder bought stop like, you know, but but the actually the ripple effect, this order is going to be fascinating before we even get into the quotes. Because Tesla's this, this package for all, Of the musk Innovations. This payback it might have been his biggest lasting Innovation because contribution to greedy. Why Corps? Because literally everyone has been copying. It not to say like that. Not to this extent. This is this is so far. We're talking about two three billion dollar pay package. Okay, keenly now. But but it's fair to say that, you know, maybe this Chancellor would have approved two billion dollars a 56 billion. I mean, this is an absurd amount. This is just absurd. It's absurdly huge. And in a nutshell, she said Chancellor McCormick said musk enjoyed thick ties with the directors tasks, with the negotiating on behalf of Tesla and dominated the process that led to board approval of his Compensation Plan. She went on to say the compensation committee and musk were not on different sides. No, they did not. Acknowledge existence of a conflict. It was a cooperative and collaborative process. She even went on to say that that he dictated the timing of the process making last-minute changes to the timeline or altering substantive terms immediately prior to six out of the 10 board or compensation meetings during which the plan was discussed. So again Why do I say that? Because it goes right back to that number that I started the show with that 70%, influence number, when you hold that, much influence at a company shareholders, should be warned that they can pretty much dictate the entire proceedings, right? Yeah, not. Yeah. Do we want to get D? I want to get deep into. I, it's a 200-page decision, 200 Page. Yeah, I have some, I have some selected quotes here. So you, you tell me what you want to do. You have something to say, you want to be some quotes? I've read some quotes and then I want to reinforce some things. I also, I can't believe McCormick. Yeah. Yeah. About the backlash to this will start. Okay, let's start at the top. First of all, we've got some triggers here for the anti-wolf Community. First of all. So, well, it's a woman that's already. That's the first that's gonna say, right? Like, I mean, when's that backlash. Thankfully not a black woman, it's not Clawdeen gay, but, but speaking of clotting gay Kathleen McCormack did get her ba at Harvard in philosophy. So that's another trigger, right? Hated a woman is a trigger, right? Also on a weird coincidence. This is from the state of Delaware and despite being the place where you incorporate, because it benefits corporations over everybody else, literally how everyone Incorporated, that's why it happens to be the home of course, of President, Joe Biden. So, this is another part of the conspiracy theory here. But I want to get into her ruling that you said. It's a two one last thing on the conspiracy, go ahead, because even if it wasn't Kathleen, McCormack it turns out that the Delaware Chancery Court is almost all women. It's 63% of the judges are female which which be okay but which basically aligns with the percentage of women, a and the country be that graduate from top universities at graduate, from Top law programs. I mean, it basically aligns with who should be running that course. It doesn't matter if it aligns with reality, it matters. That's the meritocracy, right? Musk is now saying that he wants to. A move to either Nevada or Texas, like reincorporate because he hates Delaware because I guess they're woke, right? Like which Delaware everyone goes there, not because they're a blue state, or a red state, but because they are the most lenient tax jurisdiction in the entire country for corporations. But in Texas, it turns out that the Texas Supreme Court Texas just announced a business court that is constituting in September of this year, with judges, to be appointed by the governor, which means it's going to be a giant red State, you know, bloodbath of governorship appointees. But the Texas Supreme Court, which is the highest court in Texas is three women, two, one of which is a twofer, it's the only person of color on the entire Supreme Court and six white guys. That's right. So so like the meritocracy might apply in Delaware but it certainly doesn't necessarily apply in Texas and does this mean is the ripple effect? Literally every billionaire Diaper Baby. Just moves their companies wherever anyone will let them have a temper tantrum what they say. Well, first of all shareholders do have their approved this. But as we've, we've, we pointed out over and over and over showers, don't seem to care. They don't seem to do their, they don't and we can get into that next. Yeah. Ah, I will say it's a closed, I will say it is important. What you put? It sounds like you're flippantly pointing something out about the makeup of these courts. But but when you look at Elon musk's Twitter feed this morning, I I kid you not. It is half post about this case, right about threatening to move and putting up polls like should I move to Texas and blah, blah, blah, blah? And notice he's saying like, you know, paraphrasing, it should he do it? Should I mean this is a shareholder this decision, right? Yes. It's not his company, he's company. Yeah, that's right. It's not right. But the other the other feeds that he is obsessed with at least this morning, I didn't do a deep dive, thank God into his all of his post. But today, the last 24 hour period is post after post after post of the Immigrant the illegal immigrants coming to take over America. It is all about it is all about like basically like scaring white Americans about Brown. People coming. It is post after post. He's doing this. So it's I think you're right to point out the makeup of the court in Texas because clearly he thinks that America is represented by a certain thing and it should stay that way, and it should stay that way because it supports him blah blah blah. I mean, like mildly tangentially. The Border deal that the Republicans were asking for the Republicans then killed because now you're all crazy too, so he could not, but that all happened, right? They sent the guy who came up with the thing that was standing that was standing, right? Like his reactions to this are comical on the, on their face giving that the only reason why he had 20, what 20, 8 percent or 26% of Tesla shares at the time after he got paid this. It was 20 years, 21% of the time 21%. Right. Well, now he's asking for 25% of Tesla because he spent all of his money to buy Twitter, and he's holding the same shareholders hostage. Again, Matt, this is a man worthy. Does not have enough control over the company that gave him a 56 billion dollar PayPal package. I mean, it's hell yeah. Control is not enough control. You own 70% of the influence. Everybody on the board does exactly what you say and they're getting sued for it. All right, what point do you say this is absurd? Do you have any like a highlight? Court highlights music, you can play for me. I'm gonna read some of Kathleen McCormick's Summer from her 200 Page ruling. I'm not honor her because again she has her ba in philosophy and she's clearly a good writer. So, and she spent some time on this. So I want to honor her by reading a few quotes. Here we go. Here in the final analysis, must launched a self-driving process, recalibrating the speed and direction along the way as he saw fit. The process arrives at an unfair price and through this litigation the plaintiff for requests a recall. Oh a lot of time. Is it like Tesla puneri? How about this one? Delaware courts have been presented with this question Thrice before. When more droids, when more judges found ways to avoid to finally resolving it, this decision dares to boldly go where no man has gone before or at least were no. Delaware Court has tried. It's a Star Trek reference there. Yeah. But how fast before Fox News picks up on. No man has gone before and it's a female judge colonizing. Mark again, these are all verbatim from the hearing from the The ruling colonizing. Mars is an expensive, Endeavor musk believes. He has a moral obligation to direct his wealth toward that goal and musk confused. His compensation from Tesla as a means of bankrolling that mission musk sees working at Tesla as worthy of his time. Only if that work, generates additional economic resources, that could be applied to making life multi planetary. So If you were an investor in Tesla, you're hoping the company makes cars. But what you're finding out is that Tesla is just Elon musk's bank account to go to Mars. Tesla and musk are intertwined. Almost in a Mary Shelley. You are my Creator. Sort of why Mary Shelley the writer Frankenstein as Kimball explained, Tesla created, Elon, musk's Persona and Elon Musk Persona is attached to Tesla. Musk is Tesla's public face and he describes Tesla as my company. Mine, it's mine. Get back into your point that you mentioned earlier. Matt, she says, in addition to his 22% Equity stake, must was the parrot. Matic Superstar CEO. Who held some of the most influential corporate positions? CEO chair and founder enjoyed thick ties with the directors tasks, with negotiating about half of Tesla and dominated the process that led to board approval of his comp. at least, at least as To this transaction. Must control Tesla. And again, we have the only Quantum proof of that fact in our data set. So he controlled 70% of the board influence. And and as I, maybe I mentioned before she says, put simply neither the competition committee nor the board acted in the best interest of the company when negotiating musk Compensation Plan. In fact, there's barely any evidence of negotiations at all. So I mean, this is just like I just took six selected highlights here but there's again, 200 Page ruler. I love it. Well, so I have some more for you and then because you do that, we'll get to. I want to get a little bit to, to musk's response on Twitter and somehow how some of his fans responded to that. Yeah, so inside the 200 Pages, which I read about 150 of before the show you show us, I don't know why, but it was just fascinating to me. She has a whole section on the names of the and backgrounds of the board members that were talking about. Yeah, I think part of the problem is, when you buy a company, you have no idea like who basically runs the company, you might know the CEOs named, you definitely don't know, like, the CEO or the chief marketing officers name and no one knows. No one can name a single board member who is, if you're an investor, you elect those right? Those are your representatives, it would be like you live in a state in the United States. And you have no idea who the governor is that you will elected, who your reps are in Congress? That might be true. Yes. Yeah. Which is would be stupid but it's possible. So a lot of investors are like that but she names them all. And here is a quote on why the board matters and this is right. She basically is writing the free float mission statement. Yeah, Um and you mentioned musk has extensive ties with the person's tasked with negotiating on Tesla's behalf. He had a 15 year relationship with compensation. Chair Ira, Eren, press, the other composition Committee Member placed on the working group. Antonio gracias had business relationships with must dating back over 20 years, as well as the sort of personal relationship that have been vacationing with musk's family on a regular basis. They're working group included management members who are beholden to MUSC such as general. Counsel Todd. Marin was musk. Former divorce attorney, who's admiration for musk? Moved him to tears during his deposition. He cried in his deposition because of how much he loves musk. And and she goes on to say, Marin clearly viewed himself as on musk's side. Give in the collection of people tasked. With negotiating on Tesla's behalf, Tesla's half Tesla, reminder, Tesla's behalf is not musk's behalf. It is the shareholders who own Tesla It is unsurprising that there was no meaningful negotiation over any of the terms of the plan. Yeah. And look, and I should say to all the people who, for those of you who don't listen to our show religiously and shame on you, we have pointed out. This very thing, these very relationships. Yes, several times, over the past years, I mean, right, James Murdoch vacationed with Elon, independent director, James Murdoch, son of Rupert Murdoch. You know, Fox Fox News and all that vacation. With Elon Musk, he went to Kimberly vacationing family vacations, he and a friend. Chris were both at Kimball's wedding and ran for his invests in restaurants. In fact, she goes, she bi she, I mean judgment McCormick goes person by person through the board and, and outlines how the people matter here. Well, she probably listening to our shows, including how they don't because the one woman of color on the board Johnson, She was added by gracias and she's the only person on the board who everybody was hugely enriched by their time on the board Den. Holmes, net worth is almost entirely. She's the chair of the board almost entirely because of musk, gracias made all of his money on must companies was a vendor to Tesla. They holiday every year bus, another one of the directors owed, 44% of his total net worth to MUSC, despite them having no prior relationship. The only person who didn't get rich was the black woman Linda Johnson exaggeration. This is a woman we've talked about many times the past this is Linda Johnson rice. And she's the only woman who had has a, some kind of a moral ethical code because she actually walked away. She left Tesla board, she left the board. She left the board. So these people 100% matters, but you know, what doesn't matter. Some of the governance data points that exist all over, like ESG ratings and ESG are like conversations and that's why we created. That's part of the reason why we created our data set. And here's a quote, because judge McCormick lays it out, the defendants, also point to the duration of the process, nine months, and the number of board and committee meetings 10 as evidence that their process with thorough and extensive. The defendant statistics, however, the lack of substantive work time. Spent only matters when well spent she basically said that the data points that we have, which are they met 10 times, And they have a committee and a working group, our pointless, they're stupid. Well, I was that how you should measure this. I will say it is one of the the great limitations of the disclosure. We have some pretty robust and great disclosure here in the US like compared to other countries. There's a fair amount that public corporations should disclose in their annual proxy statements. But one area where we're far behind Europe, is these meetings, these stupid committee meetings, right? Because in Europe, they actually, they take the time to actually outline. Most companies, not all of them, but they the bigger companies. They tell you what they talked about, at the meetings. Right here, it's just here. It's basically just the compensation committee met seven times end of story. Of The Amazing part about this is as part of the court case, right? There's there, they have Discovery. So they have the minutes of the meetings, right? And the first meeting of the compensation committee to discuss the grant for Musk, they didn't they, they said that she said there was one sentence about compensation. They didn't compensation didn't come up. That was a conversation committee meeting. That was that. So she points out, very methodically. How there was a working group that was led by a man who loves musk and works effectively for him, who put the together, the whole package and it was a foregone conclusion. In fact, they even named the some of the investors that they consulted with the package who gave them notes, right? Which was fascinating to me because like the investors are not BlackRock Vanguard State Street Fidelity. The large, you know, passive investors. It's Bailey Gifford. Its prime cap. It's Jenison. It's a bunch of investors. Who are much more aligned with musk, right? Like that. They they're Starstruck but I just can't I went through. I can't. Get over the fact that a Tesla wasn't, we may love you Elon Musk for being a Visionary, but it wasn't even his idea because she says in 2006 Tesla announced. It would begin to sell the signature, 100 Roadster for approximately 100,000 by August. 2007 Tesla pre-sold, the bunch of the roads which became available in 2008. The same year that musk became Tesla CEO He wasn't even the CEO. For the build of the first cars that Tesla sold out fascinating about this. And why this case is important Beyond just sort of the actual facts of the case. Because as so she in her in the report she mentioned that Kimball himself Kimball must we. Matt we've had this whole conversation, you didn't even, you didn't even point out that his brother is on the board. He didn't even need to write the board. The board is so compromised that you don't even have to mention that. But, yes, Kimball musk is a director on this board. And she is wise to point out that to quote him. He says, Tesla created, Elon, musk's Persona, and Elon musk's, Persona is attached to Tesla. And that is part of this. Third story of Tesla, right? Is that despite the fact that everybody thinks that he's the founder, he's not despite everyone thinks that he as you've just pointed out with with your timeline that he, you know, he invented the electric car. He he brought it to Market first, it's none of. That is true. It is all it is. All this weird Persona, that that helped him. Not only over inflate, the share price, but over inflate his Paypal package, right? Not only, is it not true but when you put it in context with the fact that he basically views Tesla as his piggy bank to pay for SpaceX and going to Mars and buying things like Twitter and neuralink and all the fun things that he wants to do. Yes, great, that he has Vision. That's why she pointed out to a publicly traded company as a piggy bank, to win some other things that he wanted to do. And that's why it was important that she pointed out because because She is not anti, you know, like capitalism know, she's just looking at this from the purview of corporate of a corporation, right? And what is their idea exactly the CEO's role is not their enriched themselves for whatever you do. I don't care if you're planning trees and Botswana, but that's not really the point of your role of a corporation, right? That's that's publicly held by by shareholders and she specifically points out because this is why fake public companies. We decree all the time. She says, quote, the defendants maintain that the plan is an exceptional deal when compared to private Equity compensation plans. But they did not explain why anyone would compare a public companies Compensation Plan with a private Equity Compensation Plan a little that is correct. A little bit more. Linda Johnson rice. I want to point out that Business Insider reported earlier this year. That the reason what she left, the reason why she left the role as director at Tesla, is that She was a concerned about Elon musk's drug use. Okay. And that she and that she asked the board if to investigate it and of course, the board ignored her. So again, this is just another, like, part of the story of why it helps to have an independent board. And here's in the end to wrap up this segment because I could, it was so great reading the wrap it up. And then I want to quickly touch on some of the things I found on Twitter and then we'll move forward. If I think the takeaway here is, if investors had just voted like they cared about this board because investors vote for whatever management says, they don't take the time to do diligence, they don't buy the data. They don't look at the people. We've been told repeatedly, I don't care about the board. Why do I care? If I make money Stuart Kirk just wrote it in entire. Op-ed about governance, doesn't matter. We're Hypocrites because all we care about is making money. In fact we should just say all we care about is making money and quit it with the governance stuff. If if anybody took eight seconds to look, Get this board. You could have avoided, 1700 trial, exhibits, nine live. Testimony of four expert Witnesses and nine fact-based Witnesses, video testimony from another three Witnesses depositions from another 23, fact-based Witnesses in five expert Witnesses and 255, stipulations of fact, a 200 Page document detailing every little detail. The process it took to make the richest man in the world. The richest man in the world such that he is controlling satellites that he can turn off in the middle of a war. If he doesn't think about it, he can spew anti-semitic whatever he wants, he can buy, you know, full social media site, and dismantle them, do whatever build them to. So that they just amplify his voice, he can he can as an immigrant, he can scare Monger other immigrants coming into the country. Only way investors get themselves in this position, we could if He doesn't get a 55 billion dollar PayPal package, none of this is true. Well, if investors had looked at the board and said your compensation committee sucks. I will say all of them out. I will say that the the only compelling part of the argument against this is is the fact that the 81% of all shareholders did vote for this and that and that includes 73%. Non insiders, you could you you know, it is their role to to do their due diligence and to learn a few things. But I know that that's the only kind of compelling argument against this right. Shareholders did. In fact, although I will say, yeah, these are not to say on page, like at all us company was not binding, so they could have even voted this down, it might not even mattered, it wouldn't have mattered, right? But that's something that you can say here. I will say this, right? It's not too late. The data exists now where you have performance metrics and like, you know, who's actually independent, you can do groupthink analysis of your boards. You can do it right now. We know because we have data. Yeah, we can do it and actually vote so that you don't give someone 55 billion dollars have to sue them. Hopefully, claw it back. But in the meantime, create massive negative, Ripple effects on in the universe, including the, the value of the shares that you hold because they can continue to fall. I'm guessing today as they have been for. I think they were down 2% at the open. Yeah. Okay. So before we wrap up this, I just wanted a few things I found on Twitter X, whatever. But whatever he calls it, he said Elon Musk said, Again, he speaks through this medium. Now, it's about. That's where you hear him. He said, never incorporate your company in the state of Delaware. And I recommend incorporating in Nevada, or Texas if you prefer shareholders to decide matters, And then his own chatbot, his own AI chop box grok. This is what rock said, respond to that. One of the things that rock said, was that, about this case, maybe it will even encourage companies to invest more in their employees and products, rather than just Landing the pockets of their top Executives. Wow, that's what rock said. Oh, but then But then he put up Elon must put up a poll should Tesla change its state of incorporation to Texas Home of its physical headquarters and this is what some of the the responders. This is what some of the replies were to this poll. Every company should change their state of incorporation to a red state, right? So this is where okay, but this is where we're at. I'm saying that this is why we started the top of the show with with talking about the fact that the, it was a woman who pointed this out, right? And that she went to Harvard and it happened in Delaware. Someone else says, I think moving to a state that likes business, instead of a state that actively hate capitalism is probably good. And remember where this is someone with complete unawareness of why corporation's Incorporated in Delaware in the first place. And finally, someone said and here's a good one for us all. So When we incorporate in a different state, you can introduce the Dual class finally finaly. Yeah, public company. Then it's, that's what you know, what. And that, that actually in a nutshell, is what dual class structures are about. It is making the company, your personal piggy bank, because you have no shareholder accountability. You took their Capital but you don't answer to them anymore, that is the opposite of the point of a public company. Okay man, that's enough for Elon Musk, do you? I gotta give you. You know what? I'm gonna. I'm gonna make this a democratic process. You're and you're that you represent the entire democracy of a vote of one. Do you, do you want to end the show here? Or do you want me to keep going with? What else I have? What else I'm covering this morning. I'm gonna know what? I I want to end the show here. Okay, I actually say this for the day because I have some, I have some good information here about tech CEOs, testifying in DC, in a bunch of layoffs at tech companies. I will cover that on front in the Friday show. Yeah. So like that and and you know what? Honestly, yeah, I think that this is the most important decision. To come out of a court about why people matter at these public companies. Why our company matters. Why our company? Yeah. We're waiting for. I don't know. I don't I get your hands on this date and get your hands on us. We'll we'll talk you through the day though. Well, we'll walk you through how to use it. Yeah. That's hazelnut Raul's. I am your analyst whole mattress. Cardi, I'm exhausted, I need a my tie. Maybe in Delaware somewhere. All right, we are free float. We are we have a show coming out tomorrow. It's going to be a proxy countdown. We're doing actually a big vote on what? Oh yeah. We're doing a German company Siemens. Sure. Of course non-us company recovering. Yeah, we're gonna cover them tomorrow. And we'll be back on Friday to wrap the week until then goodbye.