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How Tesla Shareholders Upheld Elon Musk’s Sky-High Pay

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How Tesla Shareholders Upheld Elon Musk’s Sky-High Pay

Tesla shareholders on Thursday voted to reaffirm a roughly $48 billion compensation package for Elon Musk, which was originally approved in 2018 and was nullified by a judge early this year.

How the vote on Elon Musk’s compensation broke down

Source: Company disclosure

Note: The compensation vote required a majority of votes cast to pass and excluded shares held by Elon Musk and his brother, Kimbal.

By Lily Boyce

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The vote, which comes as executive pay continues to rise, amounted to a referendum on a corporate leader whose firebrand personality helped popularize electric vehicles and make Tesla the most valuable auto company. Mr. Musk’s pay package helped him become one of the richest people in the world.

But recently, Tesla has begun to show signs of struggle: Sales and profit have declined, and the company has lost market share as other automakers produce more E.V.s. Tesla’s stock price is less than half of its peak in late 2021.

Thursday’s vote arose from a court case in Delaware, where the company is incorporated, that voided Mr. Musk’s pay package. The judge in that case ruled in January that Mr. Musk had largely dictated the terms of his pay to a board of directors stacked with allies, close friends and his brother, Kimbal Musk.

Many investors contend that Mr. Musk has deserved every penny. The compensation package shareholders approved in 2018 consisted of stock options conditional on ambitious sales and stock price targets that the company easily surpassed.

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For Mr. Musk and Tesla, the reason to hold a vote was to show that if shareholders backed the pay package again, the Delaware court could be persuaded to reinstate it. In the end, Mr. Musk easily prevailed, with more than 70 percent of voting shares in favor of the package — an almost identical proportion to the 2018 vote.

Vanguard, whose 7 percent stake in Tesla makes it the company’s second-largest shareholder after Mr. Musk, voted in favor of the pay award despite voting against it in 2018.

Other large investors argued that Mr. Musk’s compensation was far too large, especially when the company’s bottom line has suffered. Norges Bank, the world’s largest sovereign wealth fund, and California’s public employee retirement system, the largest U.S. pension fund, both opposed the package.

Tesla, however, is a rare big public company whose shares are heavily owned by mom-and-pop investors, rather than big financial firms, high-net-worth individuals or company insiders.

Small investors hold almost half of Tesla’s shares

The 11 largest companies in the S&P 500, ordered by proportion of non-institutional and insider investors among shareholders

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Source: S&P Capital IQ

Note: Composition data as of Tuesday, June 11.

By Lily Boyce

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Some analysts suggested that given Mr. Musk’s fan base, such a large share of so-called retail investors could have helped his case for retaining his compensation package.

The debate about Mr. Musk’s compensation raised questions about the limits of executive compensation and the accountability of Silicon Valley billionaires whose wealth gives them vast influence. In addition to running Tesla, Mr. Musk owns X, the social media company, and SpaceX, the rocket company whose Starlink internet satellites account for much of what orbits space.

The automaker has been accused in recent years of fostering hazardous or discriminatory working conditions, and some investors suggested that Tesla’s board lacked serious oversight of the company’s operations, including the mercurial Mr. Musk.

Shareholders on Thursday also voted on whether Tesla should reincorporate in Texas, rather than remain in Delaware. That vote also passed.

How shareholders voted on moving to Texas

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Source: Company disclosure

Note: The reincorporation vote required a majority of votes from all shareholders to pass.

By Lily Boyce

More than two-thirds of Fortune 500 companies are incorporated in Delaware, according to Bernstein, the research firm, in part because of the state’s well-established legal system for companies.

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Mr. Musk and Tesla argued that moving to Texas better aligned with its operations: Its largest factory is in Austin, which is where Thursday’s meeting was held.

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Column: How a surgeon general's warning and a Supreme Court ruling may place gun control on the front burner

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Column: How a surgeon general's warning and a Supreme Court ruling may place gun control on the front burner

For decades, gun control policy in the U.S. has been virtually untouchable — except through efforts to make America’s gun culture deadlier, raising the toll of innocent victims.

Two recent developments suggest that the ground may finally be shifting toward rationality.

One is an “advisory” from Surgeon General Vivek Murthy identifying firearm violence as a public health crisis — the boldest statement from a government official calling attention to the horrific consequences of the nation’s turn away from common sense gun control.

Originalism tells judges not to consider the practical consequences of their interpretations.

— Former Supreme Court Justice Stephen Breyer explains why America can’t pass workable gun laws

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Murthy’s report is in the finest tradition of public health policy, akin to the 1964 report by Surgeon General Luther Terry that placed the links between smoking and cancer, bronchitis and coronary disease into the public record.

As Murthy himself observes, that initiative placed the U.S. on a course of tobacco regulation that reduced the prevalence of smoking from 42% of adults in 1964 to 11.5% in 2022.

The other is a June 21 Supreme Court decision finding that laws barring domestic abusers from possessing guns are constitutional. The ruling is an indication — albeit slight — that a majority on the court has concluded that earlier decisions that found almost any state and local restrictions violated the 2nd Amendment were far too indulgent.

Let’s take the advisory and ruling in order.

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Murthy’s advisory is an extraordinary synopsis of the toll of America’s fascination with firearms and its failure to regulate gun ownership.

Firearms passed motor vehicles as the leading cause of death of children and adolescents in the U.S. in 2019.

(U.S. Surgeon General)

He reports that firearms are now the leading cause of death among children and adolescents, having passed motor vehicles in 2019. In 2022, guns killed more than 48,200 Americans through homicides, suicides and accidents, rising by about 16,000 over the previous 10 years.

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Murthy’s report notes that guns are used in 55% of all suicide attempts and that their lethality in those cases is unmatched — nearly 90% end in death, higher than any other method.

The report treats mass shootings (defined as those with four or more victims, not counting the shooter) soberly. These account for only about 1% of all firearm deaths, but their impact is far greater due to their “outsized collective trauma on society” and their “strong negative effect on the public’s perception of safety.” One in three adults “say fear prevents them from going to certain places or events.”

Murthy’s report puts the lie to the familiar claim by Republicans and gun rights fanatics that the problem, especially when it comes to mass shooting, is mental health, not firearms.

House Speaker Mike Johnson (R-La.), for instance, told Fox News anchor Sean Hannity in October, after a gunman killed 18 people in Lewiston, Maine: “Mental health, obviously, as in this case, is a big issue, and we have got to seriously address that as a society and as a government.”

Yet Murthy reports that “one’s mental health diagnosis or psychological profile alone is not a strong predictor of perpetrating violence of any type…. Importantly, most people with serious mental illness are not violent against others. In fact, people with serious mental illnesses are more likely to be victims of violence.”

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For all their nattering about the need to address mental health, anyway, Republicans have never lifted a finger to promote any programs to do so.

Now to the Supreme Court.

international comparison

The rate of firearm deaths of childen and adolescents in the U.S. vastly surpassed the rates in other developed countries.

(U.S. Surgeon General)

Rahimi v. United States, which yielded an 8-1 decision on June 21, is the first gun-rights case to come before the court since a 2022 decision known as Bruen, in which Clarence Thomas, writing for a 6-3 majority, essentially found that all modern efforts to regulate firearms are unconstitutional.

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Thomas held, in effect, that the only legitimate basis for judging gun laws is historical — weighing the laws against the language of the 2nd Amendment to determine how the amendment was viewed by its drafters in 1789 and how their approach was dictated by the political and social context of that time.

In Bruen, Thomas ridiculed Justice Stephen Breyer’s dissent (with which justices Sonia Sotomayor and Elena Kagan concurred). Breyer had opened his argument with nine pages of statistics about gun ownership and its consequences for health and safety.

“It is hard to see what legitimate purpose can possibly be served” by Breyer’s figures, Thomas sneered. “Why, for example, does the dissent think it is relevant to recount the mass shootings that have occurred in recent years?”

In Rahimi, however, Chief Justice John G. Roberts Jr. asserted that the consequences of unrestricted gun ownership were highly relevant. To be fair, this was easy. The record made clear that Zackey Rahimi, the gun owner at the center of the case, was one vicious specimen indeed. As Roberts laid out in the opening three pages of his majority opinion, Rahimi had beat up his girlfriend (the mother of his child) and fired in her direction or at a bystander as she fled his grasp.

After she got a restraining order against him, he stalked her, threatened a different woman with a gun, was suspected by police of at least five other shootings, fired at motorists in at least two road-rage incidents and fired his gun indiscriminately at least two other times. Police searched his home and found a pistol and a rifle. He was charged under a Texas law that criminalized possessing a gun while under a retraining order due to domestic violence.

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Despite all that, the 5th Circuit Court of Appeals overturned Rahimi’s conviction, citing Bruen.

Roberts’ decision in Rahimi is a step toward ratcheting back the Bruen effect, in which almost every gun regulation is suspect. That brings us to the “originalism” principle, which undergirds the court conservatives’ distaste for restrictions on gun rights. As expressed by Thomas in his Bruen opinion, originalism holds that interpreting the constitution must depend on the “public understanding of a legal text in the period after its enactment or ratification.”

As the now-retired Breyer put it in a recent essay, “the originalist, instead of looking to the text and asking what the words mean now, may well ask what they would have meant to an ordinary eighteenth-century person” and applies them to the world of today. (Breyer isn’t a fan of originalism.)

Scholars such as Stanford historian Jack Rakove argue that interpretations of the 2nd Amendment depend more on originalism than any other provisions of the Constitution. Its impact emerged most notably in the Supreme Court’s so-called Heller decision. In that 2008 decision written by Justice Antonin Scalia, a 5-4 majority overturned a Washington, D.C., ordinance largely barring citizens from possessing handguns for self-defense in their own home.

Heller overturned more than the D.C. law — it upended more than 200 years of scholarship about the meaning of the 2nd Amendment’s preamble, which links “the right of the people to keep and bear arms” to the establishment of “a well regulated Militia.”

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As Breyer pointed out, historians and linguists had argued (in a friend-of-the-court brief in the Bruen case) that the phrase “bear arms” overwhelmingly referred to “war, soldiering, or other forms of armed action by a group” — not to an individual right. Heller, however, established an individual right to gun ownership for the first time.

Bruen expanded that right to gun ownership outside the home. The ruling deemed unconstitutional a New York law requiring citizens to have a license to carry firearms in public. America’s rising tide of gun violence can fairly be traced to Heller.

Scholars have pointed to numerous problems with originalism. One is that judges are (usually) not historians. They may be utterly at sea when trying to find the apposite historical application to contemporary conditions.

The drafters of the 2nd Amendment, as it happens, were concerned about the public threat of a government’s standing army; historians argue that the amendment was designed to prevent the federal government from interfering with the creation of state militias.

Firearms in the 18th century were “not nearly as threatening or lethal as those available today,” Rakove writes; people in that era were concerned not with threats from “casual strangers, embittered family members, violent youth gangs, freeway snipers, and careless weapons keepers.”

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In other words, applying an 18th century mind-set to 21st century conditions is a fool’s errand. “Originalism” only interferes with judges’ responsibility to ponder the real-world impacts of their decision — their option, Rakove says, is to “ransack” the historical record for quotations that can support their preexisting goals.

“Originalism,” says Breyer, “tells judges not to consider the practical consequences of their interpretations.” Its product is the paralysis of federal, state, and local efforts to regulate gun ownership. It’s also responsible for the contraction of individual rights being rolled back almost gleefully by the current Supreme Court majority, notably abortion and other women’s reproductive healthcare rights, as originalists argue that the concept of privacy on which those other rights are based can’t be found in the Constitution.

It’s also proper to note that the public during the time the 2nd Amendment was drafted, enacted and ratified is very different from the public affected by its consequences today. In 1791, among other distinctions, enslaved people were not considered citizens and women could not vote. Who set the terms back then under which today’s Americans must live?

Rahimi won’t solve the mess in gun regulation created by the Heller and Bruen rulings. A multitude of pending cases might strengthen it or undermine it. But at least it’s a step back from the abyss.

Murthy’s advisory gives a similar impression of being a first step on a path that might lead nowhere. He calls for more research on violence prevention strategies and laws preventing children’s access to guns, universal background checks, banning assault weapons and restricting the carrying of loaded firearms in public.

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The bottom line, of course, is that America’s gun violence crisis can only be solved by fewer guns. There’s a long road ahead to reaching that goal.

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Supreme Court upsets $10-billion opioid settlement because it shields the Sacklers

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Supreme Court upsets $10-billion opioid settlement because it shields the Sacklers

The Supreme Court on Thursday rejected a mass settlement related to the nation’s opioid crisis that would have paid an estimated $10 billion to victims, hospitals, states and others, and shielded the Sackler family from further liability.

By a 5-4 vote, the justices ruled that a bankruptcy judge does not have broad power to arrange a mass settlement of thousands of claims that includes protections for people who are not bankrupt.

The justices were split in an unusual way. Justice Neil M. Gorsuch spoke for the majority, while Chief Justice John G. Roberts Jr. and Justices Sonia Sotomayor, Elena Kagan and Brett M. Kavanaugh dissented.

“We hold only that the bankruptcy code does not authorize a release and injunction that, as part of a plan of reorganization under Chapter 11, effectively seeks to discharge claims against a nondebtor without the consent of affected claimants,” Gorsuch said.

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“Today’s decision is wrong on the law and devastating for more than 100,000 opioid victims and their families,” Kavanaugh said in dissent. “The court’s decision rewrites the text of the U.S. Bankruptcy Code and restricts the long-established authority of bankruptcy courts to fashion fair and equitable relief for mass-tort victims.”

The Sacklers, owners of the Purdue Pharma company, had denied wrongdoing but agreed to contribute $6 billion to the settlement fund if they would be protected from future lawsuits.

The case has been closely followed not just because of the opioid settlement but also because of the use of bankruptcy laws to settle other mass lawsuits involving the Boy Scouts of America and some Catholic dioceses.

Purdue Pharma filed for bankruptcy in 2019 facing thousands of lawsuits alleging its marketing of OxyContin as a nonaddictive pain relief pill had triggered an opioid epidemic that led to more than a half-million deaths since the mid-1990s. In the decade prior to the bankruptcy, the company had distributed about $11 billion to members of the Sackler family and their offshore accounts.

Their lawyers maintained that more than half of this amount was paid in taxes.

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But the scale of the damage and the liability for OxyContin was extraordinary. A bankruptcy court later put a hold on new lawsuits, while the pending claims against Purdue Pharma and the Sacklers were estimated to seek in total more than $40 trillion.

A coalition of creditors, including victims, hospitals, local and state governments and tribal nations, negotiated a settlement that was that expected to pay out about $10 billion. Most of the funding — about $6 billion — came from the Sacklers.

In 2021, a bankruptcy judge approved the settlement and described it as the “only reasonably conceivable” way to fairly resolve the mass of lawsuits. Without the money from the Sacklers, he said the company would be liquidated, leaving most of the creditors with nothing.

While more than 95% of the creditors said they approved the deal, including all 50 states, the Biden administration’s bankruptcy trustee opposed it. He did so because the settlement shielded the Sacklers from any further or future liability.

In Harrington vs. Purdue Pharma, the trustee argued that the Sacklers were not bankrupt and therefore, cannot take advantage of the shield provided by a bankruptcy settlement.

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Last year, the Supreme Court put the settlement on hold to consider that argument.

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Inflation’s Wild Ride

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Inflation’s Wild Ride

“The signal that we’re taking is that it’s likely to take longer for us to gain confidence that we are on a sustainable path down to 2 percent inflation,” Mr. Powell said in May, after price increases had stalled for months. Inflation has recently cooled again, and policymakers are waiting to see if the trend lasts.

The question now is just how much continued progress on lowering inflation Fed officials will need to see to feel comfortable lowering interest rates.

Investors still think it is possible that the central bank will cut rates in September, based on market pricing. Fed officials themselves predicted one reduction this year and four in 2025, as of their June economic forecasts.

For politicians, that means that the November election will almost certainly happen against a backdrop of high interest rates that are making car leases, credit card borrowing and new mortgages pricey for consumers.

After years of elevated inflation, Americans are also still seeing much higher price levels at the grocery store, on car repair bills and at hotels than before the pandemic.

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Price increases have slowed, but getting used to new price levels could take time for consumers.

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