Transcript
Up, this is proxy countdown. Welcome to the Big Show for the week of May 27th 2024 alongside my tag team partner. Matt mascardi. I'm Damien rolles and today's countdown, female power at DuPont A CFO named Butch a proxy cage fight at crown castle that includes a son-in-law named trip. Progressive shareholders at Wings Stop and on the big boat. A man named Elon Let's get to our top stories. Let's start at Dupont, where it was announced, that CEO Edward Breen will transition to the role as full-time executive chair in June. The new CEO at Dupont will be Lori coach who was currently CFO and the new CFO will be anatella Francis. The new CFO at Raymond, James Financial, will be Jonathan Butch, orlog Junior. That's it. Just want to report. That a man named Butch will be the head of numbers at a financial services company, which makes sense when you realize it is headquartered in Florida. How dare you a leadership change was announced at neurocrine biosciences Kevin Gorman will be replaced by Kyle Gano. But of course Kevin will remain on the board in order to irritate Kyle. This is a new director at Lockheed Martin. Her name is Heather Wilson. Heather served as the secretary of the US Air Force from 2017 to 2019. This means that there will now be four, Lockheed Martin directors with direct Air Force, connections, including CEO, James. Take it and Morgan Stanley executive chair. James Gorman announced that he will be leaving the board at the end of 2024. To our proxy cage matches. The proxy cage match is over at crown castle. All four, dissident directors receive the average support of about six percent of crown. Castle Sheryl holders. The nominees were led by co-founder and former CEO. Ted Miller his son-in-law trip rice. And Crown Castle's founding CFO Charles green now glass Lewis supported former CEO, Ted Miller and the founding CFO Charles green, but no other candidates, not the son in law. Well ISS supported none of the Ford dissident nominees. Uh, previously crown castle staved off and activist campaign by Elliot Management in December, through a cooperation agreement in leadership change, which is what prompted Ted Miller to come back and begin his own battle for board Supremacy. So Miller left, crown castle, more than 20 years ago. But argued that his candidates which included his son-in-law. Possessed a strategic Insight. That crown castle is 12 and Cumberland, directors lacked. So there you go. Proxy cage. Magic. Crown castle. Over to our vote results table. This is where all the news is this week. I once again, looked at, over 50, annual meetings, over the past week, these are just the large, the largest cap companies about roughly the equivalent of the S&P 500. Once again the vast majority of directors received well over a 90% support no surprise there. Only five directors at a roughly 500 received even more than 20% votes with held that that's just five. Joseph Le Cobb from Align Technology Cheryl Miller at Celsius Holdings in three directors, from WingStop, Kate Lovell. On Kay madati and Michael skipworth so that's it and they all were just about 20%. So that's it for shareholders angry at directors will not a large cap company. I wanted to briefly mention beyond meat the fake meat company, share price. I'm just gonna give you a little history lesson here. The fake meat company. Share price was 235 in 2019. 125 dollars at the beginning of 2021. 65 dollars and 2022, 14.00 2023. Nine dollars to begin 20 2024 and is currently around 7 dollars. So despite this horrible downward structure for shareholders, all the directors up for election at the 2024 AGM received the approval of more than 96% shareholders. I think we need to stop saying that directors are investors are unhappy at 20% or more. I direct the investor seemed never to be unhappy. There's nothing that they are ever really unhappy about I can find a little bit of discontent in this, in this week's news story is there can continue to be. However, there does continue to be wise support for pay practices. Only six companies. Showed considerable descent the true winner of the week. Matt, Other members of the compensation committee at Vornado. Reality Trust. Realty, healthy trust despite the fact that 43% of Voters said, no on say on page, that's a huge number. It's basically, almost a majority 43% said, no pay chair. Daniel Tisch. And pay committee members. William Hillman the fourth Raymond Maguire and Beatrice. Hamza received 96% support for tornado show, 96%, they had to set up to pay everyone, right? You know that other companies were shareholders were relatively pissed off. At paying included, Ross stores. Amazon.com Xcel Energy, Morgan Stanley Permian resources? All about 20% said no on pay and while it's not a large cap company. It's worth noting that 76% of shareholders did a big fat no to PayPal practices at JetBlue Airways. That's a lot. Matt 766, that that smells like discontented moving over to the world of Charlotte proposals. Let's start with the victories at Wingstop of all places. I had to look it up Wings, Stop sells chicken and fries. Yeah, Fried Chicken headquartered in Texas of all places. They shareholder said yes to a proposal by the accountability board. Requesting a greenhouse gas emissions report 52% of Shirley said, yes, at Wingstop. How is this possible? I have no idea. That's Do you know if Wingstop is? Incorporated in Delaware, but headquartered in Texas like like Tesla is. So you're suggesting that they're going to ask to move to Texas. That's what I'm wondering. I'm wondering if the move here is going to be. I don't, we don't want to do that. Let's just move to Texas. And it Dexcom proposal brought by John chevin asking for a transparency and lobbying report. 51%, said yes. So, two victories there over the last week. Next up are the almost Victory. So, close at American Tower, a special meeting proposal got 45% and disclosure of racial and gender pay gaps got 49% Three moral victories at JP Morgan Chase. 43% said yes to an independent chair. 30% said, yes to indigenous peoples' rights indicators and 41%, said yes to excessive golden parachutes. That's pretty impressive. Overall I gotta say a JP Morgan Chase. I I'm going the other way like there are no moral victories, just vote. Yes just get over the hump. How about this one next era? Energy 41% said yes to a board Matrix proposals kind of a new one. The New York City Employees Retirement System requested at the board disclosed that each directors, self-identified gender and race ethnicity, as well as the defined skills and attribute, particularly with respect to climate change. So almost almost there. I don't know why they wouldn't do that one. Anyways, like anybody else already does that one, do they does next era, not read another shareholder, proposal or shareholder, finally, and at McDonald's. A proposal requesting additional disclosure regarding poultry Welfare, I love that. That's a additional disclosure regarding poultry welfare. That's basically asking how are the chickens doing, right? Right. That got 36%. Yes, that's great. 36% to me a victory. That will get a 1%. Yes. When Wingstop moves to Texas, that's the next proposal up at Wingstop next year. That's a prediction. And finally, here, my favorite Oddities from the past week from Sherlock proposals, despite all the successes we're seeing the simple majority voting so far in 2024, I've reported about several wins. Some some wins are so big that they're in the 90% approval despite that only seven percent of shareholders. Said yes, to simple, majority vote at Thermo Fisher again. I don't understand. I can't get patterns here. Yeah, what about? Fisher is not good for majority voting but it's good in like a dozen other places where we're getting 90% plus vote on that. Note, remember how I said, 41% of shoulder, said, yes to limit excessive, golden parachute to JP Morgan Chase at CVS Health only six percent said yes to the same proposal. I think you, I think you'd want to give Jamie dimon and excessive gold parachute, like, everyone's favorite the most shareholder proposals were amazon.com. There were 14 of them. They all failed. A two interesting attempts, at compensation reform at tenant Healthcare proposal. Requesting a report on plans, to integrate ESG, metrics into executive compensation failed. Only 5% said, yes. And at PayPal a proposal asking for stockholder approval of director compensation. I love that one. Only 3%, said yes and finally, how about these two? Great share the proposals at CVS health A proposal to prohibit the re-nomination of any director who fails to receive a majority vote. Got 18% of the vote, but that's an interesting way of getting rid of zombie directors, right? Like, yeah, you can't remember. Yeah, and how about this one? I love this one. A proposal requesting a policy. Required directors to disclose their expected, allocation, of hours among all formal commitments. A guy only 3% of the vote. Now, this is a funny one because this is from the anti-esg national Center for Public Policy research, which is probably why they got no support because everybody hates them. But they're asking for a very ESG Centric, that is right which I love. I, I want all directors to disclose their allocation of ours, like that's just brilliant to me. The other funny part about this one is that in the proxy, they refer, this is the national Center for Public Policy research. They refer to ISS as independent shareholder services. So that was that not ironic? That was not bad though. They got two out of three right there. They almost no no, why I Want to go backwards for a second, you know, because I want to talk about the pair, the PayPal. Stockholder approval for director compensation. It never occurred to me until this outcome that we actually asked shareholders to weigh in on management. Exactly what is right but The ones that actually report to the shareholders are the directors, the directors manage management, and the shareholders manage the directors. Wouldn't it make more sense actually to have it be cascading? Okay it is a great question. I always I wonder if the reason why we don't do it and again a reminder that these are non-binding votes anyway but I wonder if the reason why we don't do is because for some odd reason relative to Executive pay and the US to directors don't really make much money like it's it almost seems reasonable what they make compared to the CEOs. So the data actually would mildly conflict with that. Okay? Because we look at CEO pay, the average CEO pay in the SB. 500 is around, like 14 million. I think or 12 million per person. Yeah, report for, but wait, you know, like the CEO just about the CEO, but when you break down the hourly wages. Sure. I know, I know, we know that the directors true on their, their actual take home pay because they're getting options. They get stuck that they often just sell off their take home pay. Ends up being more on an hourly basis to be a director or equivalent, as it does to be a CEO and directors can be directors at five different companies where we usually frown upon that for CEOs. So the directors make nearly, as much as CEOs, do, or as much on an hourly wage basis. So why don't we wait in on how far away and to, and to segue into the big vote? That was one of the reasons the Delaware Chancery stated for, for suggesting that the directors at Tesla lack Independence because they're making a great fortune on their Equity at Tesla, right? So it's a fair point, and I'm guessing that within the next 10 years, you will not be seeing a vote under direct pay at us company, I'm guessing that it will take 30 years and I SS will finally change the policy to catch up with the Times by that, is that the independent shareholder services Or institution. No, it's the other one. Institutional shareholders, let's move on to the big vote this week. We are covering Tesla. It's the sort of the, it's become the granddaddy of all. Companies that talk about, right test. I mean, this is the company that everybody talks about it, not just people in our field. I mean, this is, this is the, this is the one that they all. So this is the onus is on you this week. Matt, how do you add insight into a talk to death situation over there, really hard? That's really hard and for like, and let me give you a little bit of background before you get going. So Tesla unfortunately has a insipid abhorrent anti shareholder. Classified board. I mean, that you don't even vote for every director annually, which I don't even know how they get away with Marca cap. This big, it's kind of an outlier. So we're only gonna vote, only get to vote on two directors. This year, that's the CEOs brother. Kimball musk and Rupert Murdoch's son James Murdoch. So it's a very nepo Centric boat this this year, but, here's the big story. I don't know how you don't know this but but here's the big story this year is that the two things being asked to vote on are a re ratification of Elon musk's pay. The huge pay package that the Delaware Chancery just shot down when which he was 2018. What was the total bill on that 56 billion dollars I think? Yeah like that deep. Something billion. And the other one is a is a is a hissy fit related to that vote which is a re domestication, they call it to Texas because Elon got upset and threatened is threatening to move the company to Texas because he's, he apparently believes that they will be more friendly, more corporate friendly in Texas. If they incorporate, They're All That Remains to be seen because Delaware is the most one of the most shareholder friendly. Sorry, corporate friendly places on Earth. So I mean we can back like we can back into those toes. Request. Because the process by which things happen at Tesla is a joke. Yeah, go ahead. So, so, all right. If first of all, I'm ready for the joke. If you have an actual joke, it's not. I wish it was a one-liner there. That if you have, if you've gone to freeflow analytics.com and signed in, gotten your free account and looked up test level, what you'll see, I do it. So often people named musk and or that have worked at Tesla own more than 85% of the influence of the sporting to Elon Musk control 69% of board, influence co-founder. That's right. Co-founder and former CTO JT Strobel who was actually also on the board controls 10% influence and of course elon's brother Kimball has 7% of influence so this is data that you would have had before Delaware throughout saying there's so much influence that Elon Musk has on the Board. This is data, that's right there. Okay, so your basic starting point here is Elon Musk. Chooses the board runs the board, like there can be a lot of pretend processes about red domestication. For instance, say, but you know, musk tweeted out, should I in Korean corporate in Texas? And should I answer came back? Yes. Personal should I. And then the board said, wait, Elon. You can't do that by yourself. We need a process. So the process was a couple of board members join a special committee to investigate two of the board members recused themselves. So, the special committee is one lady on the board who decides, oh, well, when I narrow it down from, you know, should we read domesticate to what State Should we read domesticate somehow? I magically got to Texas. Exactly what Elon had said. This is a good, this is a great part of the story, which I'm glad you pointed out. So the Tesla needed to create a special, they call us a special committee. Of the board to look at the red domestication and because they can't find an independent director other than Kathleen Wilson Thompson. Yeah, he's the entire committee. Can you call? And I asked you, can you call one person? A committee? I don't even. They actually, they, Joe Gabby was on the committee at one point and recused himself because he was worried about the blowback to him individually in his company if he said anything. So not only, they choose one woman on the board but they chose one woman whose name no one really knows who doesn't own another company so that the blowback would be less because they knew it was roughly a sham. I mean, I'm speculating but we can infer that from the action and what did let me? I want to add to that because the, the rerun of his pay is all. So, based on a recommendation from a special Committee of one and that's exactly Kathleen, Wilson Thompson. So she was one woman who's basically making the recommendations for both of these things, but it's false to assume that when you look at free flow analytics data, we know that really it's Musk. Who's suggesting it and they're justifying it, right? Like that's what's happening. There's no point in really talking about. Like we if you're a listener of this show or business pants, we've been talking about Tesla for years talking about how the board is a joke. The processes are a joke that, you know, the brother Kimball musk has been, reelected multiple times by shareholders, the votes seem to be relative sham, like nobody really cared that elon's brother was on the board years. Until now, I also want to point out this Tesla actually is my favorite company to point out to clients and perspective clients of why I love our data. And that is we solve something for Tesla that no other data, ESG data research, providers can provide, which is that we demonstrate in our data that in fact, Elon Musk is an absolute control of the sport, but you can't do that with traditional data because he it's one share one. Vote. He doesn't actually own a majority of the shares. He's not even the chair of the board, so no other provider can articulate and quantify his control like our influence, our data, which is why I this is why I love pointing out Tesla's. The prime example of the use of our data for this. A long story short, our data, our conversation piece is on these shows. It's not worth reiterating. What we necessarily think about the board. I'll front run, our recommend my recommendation on the directors vote. No on both gimbal musk and there's an easy one. Like this seems like an easy win, right? I don't even need should. Yeah, I don't think he even need us for that. I mean, when you have, when you have, when one of the so called independent directors, attended your wedding. And the other one is your brother, even even like run of the mill corporate governance and a list back in like, you know, the year 1215 or whatever. They knew that this is a bad situation, right? Like they know that this is this is not independent oversight, I mean. Yeah I think if you think if you need two people on a podcast to tell you having the brother of the founder on the board creates a conflict of interest then that like we're past the pale so we don't have to do that. So if I actually want to frame the conversation this way and it's going to be both Counterintuitive, and we'll come back to, like, do I pay us? Do I reject the board questions, but I want to frame the whole thing in this way, and it's something that you and I talked about in pre-production that really clicked for me, which is There is Tesla the asset. You are an investor in Tesla the asset, and then there's musk right personality, and all of the assets associated with musk and all the assholery associated with musk, okay? I want to separate those two because really the question before you, if you're an investor is how do I Salvage? Tesla the asset that I own. In the absence of musk, the personality that I may or may not be driving the pricing of this asset, right? Yeah. So let's just because I think we've what we've discovered and I think with the you know the general population is discovered is that Tesla really is a bit of a meme stock, right? And and the reason the reason why, because really they're just selling cars and then they don't exactly have a significant market share in anything and there's a lot of problems associated with those cars, but but what Tesla gives you is is public, it gives you access to Elon Musk, right? It's the only company out of his huge Empire, including SpaceX, AI Twitter, all of them, boring company, neuro link, whatever. This is the only way to invest into the entity that is Elon Musk, which is probably why you find, you know, a boring car company has this or I should say had this elevated share price, so, well, I mean, and and that is part of the fundamental problem with the asset itself because musk wants you to set believe that Tesla is not a car company. If it was a car, come Tesla trades at a 45 p, e ratio now, right? And in the, in the meme stock era, in the pandemic era when it first actually got profitable. Remember, that was only like, two, three years ago, that it actually became profitable. It was trading at astronomical PE ratios. If traded a 45 today, do you want to know what car company PE ratios are sure. GM traded a five. Okay, four trades at 12, Toyota at 8.5, Honda at 7, even the Chinese company byd, which is, like world renowned. Now, for being one of the leader, absolutely leaders in this technology in electrical technology. Reportedly, literally driving circles around Tesla's technology at this point. In fact, so much. So that I my, I have a working theory. That musk is so indifferent to the car piece of Tesla because the Chinese beat him like it's flat out by D is a better company at making cars. The Tesla is they traded an 18 PE ratio 18. And I guess this is what this is part of The Narrative of why you Elon likes to claim that Tesla is not a car company. He he very confusing like to call it an AI company at times even though he just got through raising like what six billion dollars for his other. AI company XII confused. Here, here's the ecosystem. Like if you consider Tesla to be an AI company of the future, it's up against alphabet and Microsoft and and Facebook meta, right? And actually, and his own company and say, well, those are the public companies that we can see they trade in the 20s and 30s PE ratio. So, even if like, it's not like they're making the chips nvidia's trading at 90 p e ratio which means if Tesla pivoted to make AI chips, then maybe it's competing in a way for the other, AI companies. But really, they're just making the software. What what he wants you to know, is there they AI that Tesla is going to be is sort of sensory robotic AI fed the AI from his other company xai. Which is using the being trained on the data from his other company, Twitter. X all together under which is using. And then Tesla's gonna, what be buying this Structural Engineering of his other other companies SpaceX to build what the Labeling. This asset is incredibly difficult, except when you think of it as this, it is the only publicly traded method to own Elon Musk. Yes, only access That's the only access you have. That's what makes it a cult stock basically at some sort of version of a meme stock. Yes, that's what. That's why you see the trading value is effectively a musk premium. Yeah, you're getting, you're getting extra PE ratio. The stock price is pumped up to just reflect I want to access. In fact, his Cult of Personality inflated that so much that it became his basically his giant piggy bank. Right. That's exactly right. It's his piggy bank and if Tesla traded at car stock prices, the PE ratio of car stocks, you should expect the share price to drop 70 plus percent by. If you assume it trades in like the 50, even a generous car stock at 15 to 20 p. E ratio here, talking about a 75% reduction in the in the Share Price Rite. That is what investors are terrified of. So we have the most investors who bought in, I guess, yes, the investors who bought in when the stock was. It doesn't matter when you bought it because if you bought in now, even if you bought in early, right? You've made a lot of money, you could bail out. You're not that worried about it, you still made money. But if you bought in any time in the last four, or five years, what you are absolutely petrified of and the investor fear, premium is 70% loss, in the value of this company because it no longer has musk, and it's just a car company. Meanwhile, the most premium is propping up the price. A multiples. Well over anybody else even if it was considered some sort of AI company because you're really only getting like you don't own the private company that is xai. You own the public company and it's not Microsoft or Google, you're still getting a premium over those. So I really got, I will say ironically, though what's the opposite of a premium in this case? Because it might be the, the anti premium, I don't know what the word is for, that, Elon Musk himself, might be the reason to that. The stock price is driven down. It's it's been slowly going downwards and it might, it might be because of him, right? Well, that Segways neatly almost, as if you have a document in front of you, with my notes on it into musk himself must a personality. So if we can't quite value the asset, or if you validated it, as a car company, it's got a tremendous amount of losses built into the stock price. It's overvalued car company. If you can't quite Peg, what Tesla is because musk wants you to think it's one thing. But It in actuality does a different thing right now. Musk is what you're afraid of losing and to your point. The musk premium is eroding. Well, he yeah, this is why I refer to, this could, this could be like, Tesla's Uber moment, right? Like, when Uber needed to eject, it's horrible. Founder Travis kalanick because of just his abhorrent Behavior to save sort of the long-term asset, right? The long-term asset that is Uber this, this could be happening at Tesla eventually, but I think the eventually is already happened, right? So part of the justification of the 2018 pay package that we're talking about. Re ratifying is, it will keep us focused on Tesla, we want to pay him. We want his. How do we know that you're saying? That's the justification, but that was the justice. No, part of the justification. You can see that in the court decision, like the conversations with musk were about, we need to keep him here at Tesla for Life himself. He's at Tesla for life, but he's been distracted. Well, before the Chancery came exactly. Yeah, so that did not work, he's an incremental CEO and he's barely that. I named four other companies as the CEO of and haven't even named neuralink or the boring company which is the other two that he's all so And his 400 children. Like, I mean, like there's not enough time or ketamine in the day to get through the amount of companies that he is attempting to manage. And you can get frankly you can get a car company right now. You can buy a car company stock that comes absent. Nazi symbols Union, quashing anti Dei anti, that's every car company like limited attention, spans, incremental CEOs, professionally, run boards. You can get that everywhere else, right? Yeah. And the market is, is, you know, if you fall the headlines, the market is catching up too. There are there are going to be low price electric vehicles coming from very reputable car companies. So If Tesla isn't quite a car company because must doesn't want it to be. And it also doesn't have market share, and it also trades at a multiple, that's much higher. And it isn't the cult of personality that is must that's driving some of that evaluation is eroding. What is really happening here? Is Elon musk's as much as Tesla is the only public option to buy in Elon Musk property to get access to musk himself. For musk, the trade-off is. Tesla is my only piggy bank to pay for all my other Ventures. I could keep going back to private markets and raise Capital but it's way more efficient. This is way faster and I get much more money. Yeah. By pulling it out of tests you just full a bunch of retail investors and a bunch of like wonky institutional vendors and you you keep you keep your share price inflated and you can access the piggy bank. I mean think of it he took him like some time to raise six billion dollars for xai at a valuation of 24 billion dollars. Meanwhile, he can just demand of Tesla shareholders, 50 billion dollars which he made in two years and used it to buy Twitter. He can just demand it and they give it to him. The access to liquidity is a premium to musk himself, that is incredibly valuable. But either way, he's not the CEO of Tesla. He's the incremental CEO of five companies or if you vote against his pay, Here are vote against rerata on the board. He leaves Tesla immediately, but he's functionally not even the CEO. Okay? So that's the figurehead behind a meme stock. I suppose that's the question as an investor. You have to fundamentally ask yourself, if musk is either an incremental CEO, who's paying attention, not really here. Anyway, using this as a piggy bank. He's going to leave now or later he's gonna get bored of this test left thing now or angry at Tesla shareholders. Now, or he's going to leave later because he's got 30 other things happening where the piggy banks been turned off. You might as well leave. And let's not forget, this might not be the worst case scenario. I mean, it definitely won't be the worst case scenario long term for in the short term, it will be but long term for Tesla shareholders. You already have another a co-founder on the board, the former CTO in JT's trouble. So it's not like the company can't exist without Elon. Or mental CEO. I so, I think that in, and of itself is really what this voter is about. Like, I think you vote against Kimball and James Murdoch great anyway, just for you, do that. Anyway, just for the sound corporate governance practices, right? I mean, like, you'd be justified to vote against Kimball at a bare minimum Murdoch as well, right? But, but I think the most important proposals in this entire proxy are two shareholder, proposals, okay? Not the pay taxes, which ones are those or even? The directors they are. Jim mcritchie of Corp. Gov.net, shout out to Jim mcritchie. He has a proposal to reduce the terms of the directors to one year killing the classified board. You. Absolutely, if you know that musk is out one way or the other short-term or longer term and you know, the cost of the longer term is paying him rectifying his pay. And giving him more money and just letting him rate the piggy bank for a little while longer so that you can buy some time you need the board to be Declassified because the goal will be to reconstitute your the board in exactly the way you talked about and it chokes me to say it. But in uber-like professional board you want professional board members to Steward this asset because it is right now a car company. And while musk says, he's going to take the AI with them, if you leave has to leave. If he's pissed off enough at Tesla shareholders, he already has he already has AI. He's already got all these other private things going on. Those aren't Tesla properties. So you're losing the most premium anyway. You like the car companies not doing as well. You want actually someone to Steward this asset so that Tesla which makes cars and maybe eventually robots and software you can sell, doesn't have to be musk doing that. It can be some professionals who take it into the future. It's debatable. Whether it's musk doing it in the first place. Anyway right exactly anyway so Jim MC Ritchie's proposal allows you to begin to actually slate directors or vote differently to vote for different skills on the board with out the with the classified board. You cannot do this without voting. Yes on this. You do not set yourself up as a shareholder. For the future to me. That's a no-brainer. Anyway in my head, I'll pick an arbitrary number. Any company, that reaches a market cap of let's say a billion dollars, even for like 10 straight days, should should be annually held elections. No matter what forever, no doubt, and a story. I totally agree. All right. The second Cheryl The Proposal is, John, Chavez and simple majority vote two or the Hall of Famers here. Okay? Because Ricky, So, this already came up for vote in 2022. I think it was maybe it was. Yeah, I was 2022. And it got a majority of the shareholders but not the 66 and 2/3. Vote required to actually change it as a bylaw musk owns doing. The math musk currently owns 21% of the shares, 20.8% and Ellison are no, he owned. Yeah, he owns around 20% of the shares now, but even then he owned 20.8% of the shares and and Larry Ellison owned a 1.7% of the shares and they voted. No, and it's still got a majority. So, today, institutional ownership went from 15% in when the prior vote was to 30, or 40%. I think now, which means you have a legitimate shot of getting this passed and if you can get simple, majority votes, and a Declassified board. you already have proxy access and one share, one vote at this company that gives shareholders a tremendous amount of leeway to both prepare for a musculus future but also control a musculus present, right? Like an incremental musk present So let's talk about what that future is because I think you can't set yourself up for that future. Until you pass these proposals but you want to be prepared for next year to slay new directors, or reconstitute the skills on the board. You'd be crazy not to be prepared for a Jurassic succession change at Tesla and based on Elon musk's distraction and just track record of being you know just outrageous you have to prepare for that right. You have to I think I yeah you don't have a choice just to prepare for Bob, Iger to come back to be CEO, Disney for the 18th time. You got to be prepared. Well, I think you're 100% correct in your assessment of Straubel. So struggle was a CTO of Tesla. He's considered one of the co-founders. He's also considered independent on this board because he's been long enough. We made jokes about this last year when he was added to the board. I mean like it was merciless because it was so stupid that that they would do this, but now it may be accidental genius because you have a built-in succession plan, you can a lot line up, JB Strobel, who knows the company, at least from its roots to be the interim CEO of Tesla. When musk says, I'm out of here, as you didn't pay me, or I'm, I'm too busy. It's already a victory. Because I don't I don't think that JT Straubel has pissed off half of America so that's hat and that's a lot of customers. So when we look at the skills like we we so we create knowledge maps of every board on Earth Here We estimate. Basically what are the base skills and knowledge in the boardroom based on what their title? The titles, the directors are their resumes, where they got, you know, what their degrees are any sort of biographical information we can have we can associate with a set of skills. What we know is JB Strobel duplicates, effectively most of musk's skills. He's not, he's duplicative, not additive, but in an ex musk Tesla. That means you have those same skills already represented the room. What you need is non-executive board members, who have complimentary and often duplicative. Some level of duplicate of skills but also complementary skills. So if Straw will become the CEO or is the defective CEO? Because musk is so distracted. Your future board needs Engineers. It needs professionals who have been on multiple boards before. In fact, I was looking, I was actually looking at directors on other boards. Thinking, if I, if Tesla was a sports team and I had to reconstitute it. Who would I trade for like, what other board members might I trade for? And I, well, I hate to say it. CEO. Dara at Uber is not a bad Target here. He's, he's been in a place where he had to clean up. Post horrible, CEO founder. He's turned it into a profitable company not without its warts, but Tesla already has tremendous amount of warts anyway, and let's not forget that Uber was teetering on this Edge on the edge of like will this company? Go away because exactly hate it. Remember, I mean there there were campaigns to delete Uber to I mean there was just so much bad going on with Uber that Dara does deserve some credit for keeping it on the track at least at a bare minimum. He's seen it happen and he's now a professional and like I was looking at boards like the Nvidia board John Deere. Who's on the Nvidia board? Who's a name that no one would have ever heard of? He's a professor, he's a mechanical engineer. He's at the California Institute of Technology. He's one of the most accomplished human beings on Earth and he's got direct experience on the Nvidia board looking at things like Ai and he's somebody who can Stand them, right? If you're worried about losing musk, why would you think? Oh, if I lose musk were dead. Rather than thinking, how do I reconstitute those skills at the board level with professionals, who have seen it who don't have the baggage? And like, you know, sort of tweet, diarrhea that must has the good news. Is Matt, unlike sports teams, you don't actually have to trade for directors. These are restrictions sit on multiple boards, right? Exactly. I love to trade, like I was to trade a dead horse for a very all day long, but the other things that this board could use when you, if you pass sort of majority voting and declassifying it is international exposure. A measure bringing in by D Executives, or someone International from China, from India, from these massive markets, as Tesla's, expanding, as a car company, and building out the concepts of AI in cars or batteries, which there are world leader in batteries. Why wouldn't you expand your Market presence through board experience and knowledge and understanding you you'd actually Enable Yourself by removing musk who will is willing to belittle huge markets or individuals or people by removing that from the board, you open up a lot more possibility. Well, of other markets say, the irony is the Elon the CEO of one of the most famous, if not the most famous electric vehicle company in the country, Who he actually belittles is his customer base because it's only the really, it's only the Liberals in this country that want to buy electric vehicles. You see, in all the polling that they're, they're the ones who are favorable to EVs and that's the market. Actually, that Elon is constantly belittling and taunting and the and Elon trying to appeal to the non-democratic progressive crowd, launches the Cyber truck, which is the ugliest car that's ever been built. And rusts canceling things like recalls immediately. Literally like that thing that he made to appeal did not appeal to the customer who would have bought it like it has no appeal. So the night look beyond all this story. Matt I think there's a case to be made that again. Forget just forget the details of this of the the gossip of all this. There's a case to be made that Elon Musk is just not the right fit to be CEO at Tesla. Not the Future Tesla, right? I mean, gee, Tesla mostly because as you say, you call an incremental CEO, but just for a lot of other missteps, along the way. Just a lot of failed promises, a lot of failed products. So, yeah, so the, the board, the non-executive directors of which there are like three on this board who really count that aren't named musk or we didn't work at Tesla, really the skill sets represented by them are financed. You've got Ira or Impressions and finance and Robinson was a former CFO. Right exactly. Right. Right. So you have a lot of Finance experience what you're going to need I actually I wouldn't even be opposed to leaving Den home on the board. Not his chair not as chair as you reconstituted right. But the you have you don't need Kimball musk whose base skills are food production? Yeah, let's move on from Kimball most and you don't need James Murdoch. Course is an immediate executive. These are antithetical to the future of Tesla. You don't get any extra additive, they're not even retail focused. They are they're they're worse than that, right? They're not useful. We've been repeating this in several of our shows. The reason, why clearly, the reason why musk and Murdoch are there are just just to provide defense for Elon, it's just a support the CEO. That's it, there's nothing. So so the director vote recommendation, here is easy, you vote. No on Kimball and no one Murdock this year, but you're really eyeing 2025 because you need to vote. Yes. 100%. Yes. On declassifying the board at 100%. Yes, on simple majority. And you need to engage with the Sham nominating committee as it exists to prepare to slate directors in 2025 when the board is Declassified, you need to start be thinking like reaching out to the John Deere's of the world. And saying, hey, we we want to draft you to what is what is likely to be. Like the one of the most important companies in the world for the foreseeable future, we need to protect that asset and that share price. There's universal access to do this. Now they do have proxy access to do that. Now that's exactly right. This also means you have to vote against reincorporate and read domesticating in Texas. Because you want the comfort of the Delaware Chancery Court like, you, you actually need that. You can't have like an incorporation by Tesla reincorporate in Texas. You effectively are seeding the control back to Elon Musk because Elon Musk is wouldn't reincorporate there if not to reject shareholder oversight in Delaware, of course, but This brings me to what would be. I think the hardest thing for me to swallow. Yeah. I know that the pay package of musk. What is asking? In rerata performance you should pay me for it. Right. But he ignores the fact that the pay package intent was to keep them focused on Tesla which it did not do at all, he rated Tesla like a piggy bank. As soon as his options were cleared as soon as he get his 10th and 11th tranches of the options which he hasn't exercised most of them. The first thing he exercised it for was to buy Twitter to distract him further by giving him that much money, it did not keep him focused on let's build Tesla to be the greatest company in the world. It forced him into. I'm gonna buy this other company and then pretend like it somehow was relevant to test la. Like I now, I'm gonna, I'm gonna raise money, his customer base, the same time, I'm going to raise money to start another AI company, but I'm going to pretend like the AI will stay with Tesla, not that other company. So if you give me more Money. If you hear it sounds like you you want to reread if his his company I am going to suggest. Oh no. As investors are considering. Yeah. Do we keep musk around a little bit longer or do? We let him like letting him be the incremental CEO or get rid of them? Do we give them access to the piggy bank, a little bit longer. I am going to suggest you spent you as an investor. You spend all of your votes your energy like cannot fix all. Once you need to declassify that board, you need to get the simple majority and you re ratify because what that will do It will allow you like a peaceful transfer of power. I think you're you're trying, you're playing three-dimensional chess here is what you're trying to do. I'm really trying to do that with this, which with this thinking, there's a chance that even buy rectangle. It still gets thrown out because he's effectively trying to end-run around the court decision. Right? Like but, and and it's gonna invite new lawsuits, but the fact is he's distracted. Anyway, he's doing 10 other things. If he leaves tomorrow, then you're cleaning up. Multiple messes simultaneously. And if you didn't declassify the board because you couldn't get that vote, you are. It's a world of hurt like you, you lose 70% of your value. It's just a car company and I don't think musk ever it was ever more than that. But the musk premium has some value to investors. At least, I just think in the short term, sure my recommendation is going to be re ratified the pay. Since the most important vote are one year terms for the directors and simple. Majority. Well, if you're looking for an hour from Matt, horrible recommendation, you can listen to my recommendation, which is to vote. No on rerun, I think. So if you're if you need that, if you're on the fence. I I appreciate what you're saying but I think you can achieve that by, by doing everything else. You said you don't have to, you don't have to re ratify pay to keep him interested for For two more years. As you, I think if you don't re ratify the pay, he leaves immediately. Yeah, and you're worried that that I'm not worried about that. But I'm, if you're a shareholder, we're currently shareholders shareholder. The whole thing will blow up. I think you don't because, like, you can't guarantee that. You gonna win the declassifying, the board because shareholders seem very fickle about some of these votes. I think Jim Richie's. Absolutely, right to put this on the, on the proposal as a proposal this year, in particular, it's the most important thing that you can do because what you need is professionals on the board, you need to Uber the board and the weirdest like way possible because no one thinks of uber and thinks oh well that was a well run company but you need professionals who can set yourself up for if Tesla is truly a robotics company, not just a car company and the cars, the first robot that it built and it needs AI inputs, it needs, you know a sensor inputs, it needs batteries. It needs all of the things that are important to Kind of like a future for robotics that's optimists concept. If that is the mission of the company going forward then you need the people on the board who actually do that. You do not need a media executive and like a cattle ranching brother, like you don't need those things musk is not the only person in the world who can do that. There is absolutely zero percent reality, that musk is the one who can do that musk has Vision, but it doesn't mean that he does runs anything. Well, or does it like all of his companies have been some smoke and mirrors? A lot of luck and he is talented, he's a talented Visionary, it doesn't mean he's the only one who can do it. There's a lot of people who are working on it and who are beating him at it. Currently open AI is beating him at like AI. So is anthropic bees beating him at cars. Boston, Scientific is beating him at robots and you want to reward him for all this failure. You want to? You want to rewrite a fight, his pay? What I'm saying is you need to put the other people who can beat him on his board. Because inevitably he's going to be distracted by all the other things. I think what you're doing here is you're angling for a free tour of the Tesla Factor. The reports of the neon. If you're listening yesterday that if you vote, Yes, to rewrite a 5 pay. He will give you a personal tour of the factory, which is an excellent use of his time. He doesn't have anything else to do. We get out of this, can we wrap this up on tests? That's the Tesla big vote. Coming up on June 13th. Summary of my recommendations please. No one Kimball musk vote no on James Murdoch. Okay, that's nice. That they too. The two of them came up this year. They have no skills that you actually need on this board vote. Yes, on pay on reroute, ratification pay but most important vote. Yes, I'm proposal 6 Declan the board, Jim Mick Richie's proposal vote. Yes I'm purple seven John Chevette and proposals simple majority vote, no on everything else. That don't need anything else. That's the proxy content for the week of May. 27th 2024 was a good one. Join us next week, when we jump back into the alternative democracy pool Forever on the lookout for shareholder sharks, floating Band-Aids, in wayward,