Entire Supercharging Team Fired?

News yesterday is that the entire 500+ person word-wide SC team has been let go. That is alarming. Why would Elon sack the execs and all the employees of this important part of Tesla's business? Could Tesla be selling the SC network off to a third party? Opinions? Other theories?

 

[gglockner]

If you owned a company and one of your managers refused your direction, would you keep her?

If the manager had a good reason, perhaps.

But to fire an executive (not a mere manager) and 100% of her direct reports? That's a textbook example of "cutting off your nose to spite your face".

 

[gearchruncher]

If you owned a company and one of your managers refused your direction, would you keep her?

Elon does not own Tesla. As he likes to point out, he only owns about 12%, and that's not enough to make him very interested in the company, and he's threatening to punish Tesla unless the shareholders give him another 12% out of their own pockets.

Elon is the CEO, and his duty is to run the company intelligently long term, not cancel a whole section of the company that is core to their mission just because one executive would only lay off 20% of their team instead of 25% when the rest of the company was laying off 10%. Oh, and then a week later realize this was a really bad move and try to start hiring people back while giving half-hearted Tweets about how committed to charging Tesla is.

I mean, if I was a shareholder in a company and saw the CEO behaving that way, would you keep that CEO? Because technically, the shareholders are the "mangers" of Elon...

 

[gt2690b]

Elon does not own Tesla. As he likes to point out, he only owns about 12%, and that's not enough to make him very interested in the company, and he's threatening to punish Tesla unless the shareholders give him another 12% out of their own pockets.

Elon is the CEO, and his duty is to run the company intelligently long term, not cancel a whole section of the company that is core to their mission just because one executive would only lay off 20% of their team instead of 25% when the rest of the company was laying off 10%. Oh, and then a week later realize this was a really bad move and try to start hiring people back while giving half-hearted Tweets about how committed to charging Tesla is.

I mean, if I was a shareholder in a company and saw the CEO behaving that way, would you keep that CEO? Because technically, the shareholders are the "mangers" of Elon...

honestly he's kind of getting screwed so maybe hes mad about that.. he makes a deal with said managers that if he can grow stock to X amount of dollars in X amount of years then he gets X amount of money.. "managers" agree because what he is claiming has never been done in history so they are like yeah sure ok you can have X money if you do that impossible task..

he pulls it off and now the judge says he cant have his money so hell i'd probably fire everyone around me as well that is some communist BS right there

 

[gearchruncher]

he makes a deal with said managers that if he can grow stock to X amount of dollars in X amount of years then he gets X amount of money.. "managers" agree because what he is claiming has never been done in history so they are like yeah sure ok you can have X money if you do that impossible task..

Except the judge ruled he lied to those managers by saying he had an independent board which advised this was a good and audacious plan, when the internal metrics showed it was already likely to happen, and the board was not independent. So those managers did not have the opportunity to make an informed decision, and that renders the contract void. You don't get to lie to someone and call it their fault, this is the very basis of contract law.

he pulls it off and now the judge says he cant have his money so hell i'd probably fire everyone around me as well that is some communist BS right there

You think it's logical to fire a bunch of people at a company you are CEO of because you are mad at a Judge that ruled on your personal pay package? And this is somehow communism? Wut?

Remember, this is the same person that signed a contract with Twitter to buy them while waving all due diligence, and then claimed that Twitter was supposed to inform him of internal company details and he shouldn't be forced to obey the contract once he learned more about the company. So he believes being accurately informed in business deals is something you have a right to, that misinformation can mean a contract can be voided, and the courts are the place to decide. You don't get to use that process and arguments in one case and then turn around and say that Judges are communists for voiding contracts when it doesn't go your way. The Tesla case from shareholders is just Elon's Twitter case in reverse, and yeah, it didn't go his direction either time because he's the one that didn't follow the contract in either case.

 

[gt2690b]

Except the judge ruled he lied to those managers by saying he had an independent board which advised this was a good and audacious plan, when the internal metrics showed it was already likely to happen, and the board was not independent. So those managers did not have the opportunity to make an informed decision, and that renders the contract void. You don't get to lie to someone and call it their fault, this is the very basis of contract law.


You think it's logical to fire a bunch of people at a company you are CEO of because you are mad at a Judge that ruled on your personal pay package? And this is somehow communism? Wut?

Remember, this is the same person that signed a contract with Twitter to buy them while waving all due diligence, and then claimed that Twitter was supposed to inform him of internal company details and he shouldn't be forced to obey the contract once he learned more about the company. So he believes being accurately informed in business deals is something you have a right to, that misinformation can mean a contract can be voided, and the courts are the place to decide. You don't get to use that process and arguments in one case and then turn around and say that Judges are communists for voiding contracts when it doesn't go your way. The Tesla case from shareholders is just Elon's Twitter case in reverse, and yeah, it didn't go his direction either time because he's the one that didn't follow the contract in either case.

how did he not follow the contract in the compensation case?

 

[gearchruncher]

how did he not follow the contract in the compensation case?

"He" (Tesla) claimed the board was independent and thus their suggestion to accept the compensation structure was not biased. The judge ruled that this was not true.

"He" (Tesla) also claimed that the tranches represented unusual growth that were unlikely without amazing performance from the CEO going forward, when internal analysis showed them as likely and already in plan, and the judge agreed this was misleading.

 

[Rocky_H]

"He" (Tesla) claimed the board was independent and thus their suggestion to accept the compensation structure was not biased. The judge ruled that this was not true.

That one I can totally see. The sycophant "yes men" club of the board is not very independent.

"He" (Tesla) also claimed that the tranches represented unusual growth that were unlikely without amazing performance from the CEO going forward, when internal analysis showed them as likely and already in plan, and the judge agreed this was misleading.

This one I find insane that people believe this was already internally known data through a company crystal ball that they supposedly knew the future. It involved a gigantic growth target of the stock price, which can't be known from internal company data. If people could know what the investment community was going to do in the future with stock prices, everyone could be guaranteed to be a billionaire.

 

[gearchruncher]

This one I find insane that people believe this was already internally known data through a company crystal ball that they supposedly knew the future

The issue is that Tesla indicated as part of the ask for the pay package was that these were targets beyond internal company expectations. That was untrue, there were internal estimates that were expected.

If Tesla hadn't said that, it would be OK, but they decided to say it, and that set up this conflict. Same issue with them claiming the board was independent.

 

[Rocky_H]

The issue is that Tesla indicated as part of the ask for the pay package was that these were targets beyond internal company expectations. That was untrue, there were internal estimates that were expected.

I think I'm going to ask you to explain the logic behind this. If an arrogant coach has an "internal company expectation" to threepeat on the next three Super Bowls...and then actually does so...that makes it not an incredible achievement and therefore not worthy of the performance bonus?

 

[Ben W]

I think I'm going to ask you to explain the logic behind this. If an arrogant coach has an "internal company expectation" to threepeat on the next three Super Bowls...and then actually does so...that makes it not an incredible achievement and therefore not worthy of the performance bonus?

Projections, not "expectations". See page 73: https://courts.delaware.gov/Opinions/Download.aspx?id=359340

At the time of the negotiations in Dec 2017, Tesla's internal projections already showed them reaching 11 of the 16 operational milestones by 2020, even without further involvement by Elon. That's a big part of why the judge ruled the way he did.

 

[Ben W]

Speaking of, I've always thought Mercedes failed in their marketing department when they decided to call their small electric car the "Smart ED". Really? Do you WANT to make people too ashamed to buy it?

Ludicrous, Insane, Plaid... all they need is a 'Maximum' trim, and they'll be LIMP. Also, their full-self-driving software was first Beta, then Supervised... that's some BS right there.

 

[gt2690b]

That one I can totally see. The sycophant "yes men" club of the board is not very independent.

This one I find insane that people believe this was already internally known data through a company crystal ball that they supposedly knew the future. It involved a gigantic growth target of the stock price, which can't be known from internal company data. If people could know what the investment community was going to do in the future with stock prices, everyone could be guaranteed to be a billionaire.

i think it comes down to would tesla be where they are today without musk at the helm? i highly doubt it

 

[texas_star_TM3]

i think it comes down to would tesla be where they are today without musk at the helm? i highly doubt it

probably farther... imagine Tesla having a Model 2 on the market instead of wasting resources on the ridiculous Cybertruck and FSD

 

[gearchruncher]

i think it comes down to would tesla be where they are today without musk at the helm? i highly doubt it

Doesn't matter. You don't get to lie and then when it all turns out OK say it didn't matter.

Just like the police don't get to break into your house and find evidence of a crime and say it was OK in the end.

Same as you can't steal $100 from someone, go gamble it, win $200, and return $101 and say that you didn't actually steal it and the owner was better off.

Fruit from the poisoned tree and all. Maybe don't do that if you want the contract to stand?

Your argument is why current shareholders might decide to re-affirm the pay package, but the initial lie is why they should have the right to vote again with complete information. But don't forget that the vote is non-binding and the judge doesn't have to accept it.

 

[gt2690b]

Doesn't matter. You don't get to lie and then when it all turns out OK say it didn't matter.

Just like the police don't get to break into your house and find evidence of a crime and say it was OK in the end.

Same as you can't steal $100 from someone, go gamble it, win $200, and return $101 and say that you didn't actually steal it and the owner was better off.

Fruit from the poisoned tree and all. Maybe don't do that if you want the contract to stand?

Your argument is why current shareholders might decide to re-affirm the pay package, but the initial lie is why they should have the right to vote again with complete information. But don't forget that the vote is non-binding and the judge doesn't have to accept it.

What did he lie about? that the board was independent? Thats subjective not a lie

 

[gearchruncher]

What did he lie about? that the board was independent? Thats subjective not a lie

Well, the judge found that they were not. That's what we have judges for, and the judge was following pretty solid, non-subjective rules for public companies like "family members are not independent."

Read these articles if you actually care to understand why Tesla's board is problematic for one listed on NASDAQ and making suggestions to shareholders, and how challenges like this shareholder lawsuit could have easily been foreseen. The first article is really great at covering the issues in a 5 minute read:

https://www.clearymawatch.com/2024/02/its-not-de-its-you-55-billion-reasons-tesla-is-not-your-company/

https://business-law-review.law.miami.edu/teslas-governance-challenges-navigating-the-complex-intersection-of-relationships-and-fiduciary-duties/

This case (as almost all are) is much more complex than "a judge voided Elon's pay that all the shareholders accepted." It comes on the heels of a whole series of issues with Tesla's governance, such as the BOD having undisclosed financial ties to Tesla which led to a $735M settlement, and a board that made no effort to negotiate the pay as is their job. A board which Elon basically hired, so this is all on him, and even then he pushed the board around in a way that allowed further questions of independence to be raised. He knew the rules, he played fast and loose with them, and he found out. We'd all do better if we read up on the case in whole before discussing it as if it was simple.

I like this quote from the first article:

Delaware issuers should take comfort that McCormick is not setting a new standard of corporate governance; she is holding one issuer accountable for woeful failures.
...
Tesla’s failures provide a near-textbook case of worst practices when it comes to board approval of executive compensation. At every turn, companies, regardless of how much they’d like to pay their executives, have the opportunity avoid Tesla’s fate.

also:

In justifying this compensation as fair, defendants made numerous arguments – to compare what Tesla “gave” versus what Tesla “got”; that the milestones set were ambitious and difficult to achieve; that the shareholder approval proves the price was fair; and even that the grant was fair because it worked – Tesla thrived during the time of Musk’s enormous grant. Chancellor McCormick devotes ample space to debunking each of these arguments, but ultimately takes issue with two central themes. First, given Musk’s sizeable 21.9% equity stake in Tesla and his public declaration that he had no intent to leave the company, such a large grant was unnecessary to drive his performance and retention; Musk was naturally aligned with shareholder interests and the plan’s goals. Second, though the board claimed to be concerned about keeping Musk fully engaged at Tesla, they made no effort to condition compensation upon Musk providing a set amount of time or attention to Tesla over his other projects. Essentially, as Chancellor McCormick points out, there was no relation between what Tesla got out of Musk via the $55 billion compensation package and Tesla’s stated goals – they could have “gotten” the same result from “giving” much less.

The opinion also highlights that although the board claims to have set ambitious milestones that would be difficult to achieve, by their own conservative accounting metrics, some milestones were 70% likely to be achieved soon after the grant was approved.

 

[CyberGus]

A competent corporate lawyer would have noted that such an earth-shattering compensation package would be subject to extreme scrutiny if triggered, and possibly even to shareholder lawsuits. To be unassailable, Tesla would need an actual independent compensation committee, and/or full and correct disclosures to the shareholders prior to the vote.

Either it was not sufficiently reviewed by legal, or the Board chose to ignore the advice and take the risk. They failed their due diligence.

There's no way "Pearson, Specter and Litt" would have let this happen.

 

[CyberGus]

If you owned a company and one of your managers refused your direction, would you keep her?

If your boss does not threaten to fire you at least once a year, you're not doing your job.

 

[gearchruncher]

Either it was not sufficiently reviewed by legal, or the Board chose to ignore the advice and take the risk. They failed their due diligence.

Read the article. The board didn't even bother to get independent legal review, didn't do any diligence on the compensation relative to other executives, and then both made false statements in the proxy materials while also leaving out all of the disclosures that were needed.

As the article says, the situation reads like a manual on how NOT to set executive compensation. Thankfully in the USA, we don't just let it slide because "it worked out in the end." And in fact the Chancellor (judge) argues that it didn't work out in the end because one of the duties of a Board is to not pay more than they have to for executives, and there was no clear reason they needed to pay Musk even one dollar as he owned 25% of all stock at that point and they were paying him for stock price increases. He was already fully aligned with Tesla's success and a compensation package like this should only be used when that is not true. No additional compensation was needed at all, yet they agreed to a pay package 230X larger than the average CEO. They completely failed their duties.

Ironically, if Elon had let them do their jobs, they may have negotiated with him down to $20B and it would have stuck. Instead he had to bypass all of that to ramrod $60B, and now it's left him with nothing, because sometimes the process actually does work, and a punk rocker with 9 shares can take you down when you play fast and loose with the law.

 

[gt2690b]

Read the article. The board didn't even bother to get independent legal review, didn't do any diligence on the compensation relative to other executives, and then both made false statements in the proxy materials while also leaving out all of the disclosures that were needed.

As the article says, the situation reads like a manual on how NOT to set executive compensation. Thankfully in the USA, we don't just let it slide because "it worked out in the end." And in fact the Chancellor (judge) argues that it didn't work out in the end because one of the duties of a Board is to not pay more than they have to for executives, and there was no clear reason they needed to pay Musk even one dollar as he owned 25% of all stock at that point and they were paying him for stock price increases. He was already fully aligned with Tesla's success and a compensation package like this should only be used when that is not true. No additional compensation was needed at all, yet they agreed to a pay package 230X larger than the average CEO. They completely failed their duties.

Ironically, if Elon had let them do their jobs, they may have negotiated with him down to $20B and it would have stuck. Instead he had to bypass all of that to ramrod $60B, and now it's left him with nothing, because sometimes the process actually does work, and a punk rocker with 9 shares can take you down when you play fast and loose with the law.

I doubt he'll walk away with "nothing"