A good day’s work for a good day’s pay. Should this age-old wisdom apply to overpaid CEOs as well as their workers? A Delaware court will soon decide, a turn of events that must have the richest man in the known universe, Elon Musk, feeling more than a little bit uneasy.
Delaware’s little-known Court of Chancery normally provides business moguls a battleground where they can slug out their big-ticket differences. But the court also gives stockholders a chance to push back against the moguls — and one modest shareholder in the Musk empire has done just that.
Shareholder Richard Tornetta, a former heavy metal drummer, filed suit in 2018 against the company’s board for lavishing unnecessary billions upon Musk.
Tornetta’s challenge has ended up before the Chancery Court’s Kathleen McCormick, a judge who’s already demonstrated a distinct lack of patience with Muskian antics. Just this past October, McCormick ruled against Musk in another case. She might well again.
Musk’s current Tesla CEO pay plan, notes CNN Business, gives Musk “the largest compensation package for anyone on Earth from a publicly traded company.” Under the plan, the higher Tesla’s share price goes, the more new Tesla shares Musk gets.
Thanks to that connection, Musk’s personal net worth now sits at $189 billion, the world’s largest personal fortune. In 2018, the year Musk’s Tesla pay deal went into effect, some 40 billionaires worldwide topped Musk on the Bloomberg billionaire charts.
Back in 2018, major shareholder advisory firms recommended that Tesla shareholders reject the pay deal that Tesla’s corporate board — a panel that included Musk’s brother and assorted close pals — wanted to give Musk.
Musk himself, one advisory firm noted, already had plenty of incentive to work hard for Tesla’s success. He owned 22 percent of Tesla’s shares even before his new CEO pay deal.
The week-long trial on Richard Tornetta’s Delaware lawsuit against Musk and Tesla ended in mid-November. Judge McCormick’s decision in the case will likely come down sometime over the next three months.
McCormick’s previous ruling against Musk came when the billionaire tried to back out of the deal he cut last spring to buy Twitter. After that ruling, Musk had to go ahead with the purchase. Now he’s flailing about, trying to make others pay the price for his impulsive takeover bid. He’s already laid off half the Twitter workforce.
If McCormick rules against Musk once again, Musk will still walk away fantastically rich. But he won’t walk away happy. His ongoing Twitter debacle — and now the Tesla litigation — have dealt his reputation for unparalleled business “genius” a potentially fatal blow.
Under cross-examination in the Tesla case, for instance, Musk had to concede that he didn’t come up with the original vision for Tesla himself, the claim he’s been making for years.
Musk turns out to be as flawed as the rest of us. The key difference: Musk has the power and wealth to make others pay for his mistakes.
Musk has also benefited, unlike the rest of us, from billions in taxpayer subsidies. Handouts to his electric car, solar panel, and spaceflight businesses — all “long-shot start-ups,” the Los Angeles Times has detailed — gave his companies their secret sauce. Those subsidies launched Musk’s unparalleled personal fortune.
So what can the rest of us do to prevent another “brilliant” entrepreneur from building a fortune off the insights, labor, and tax dollars of others? We can deny subsidies to companies that pay their top execs hundreds of times more than what they pay their workers. We can tax the rich at much higher rates.
And we can put Elon Musk atop a rocket and send him off to where he has repeatedly announced he dearly wants to go — to Mars.