Musk deserves his monster moolah

Some corporate governance questions look easy to answer. Take this one: should Elon Musk be allowed a gargantuan $56 billion payday? Well, obviously not. The Tesla boss is the world’s richest man, worth $340 billion. So, why does he need astronomic extra wonga just for running a car group?
Rephrase the question, though, as it’s just been put in a Delaware court and you find yourself grappling with a quite different issue. Should a judge have the right to block a Musk payment — now worth more than $100 billion — that’s twice been approved by Tesla shareholders? It’s the latest decision of Kathaleen McCormick, who’s just upheld her January verdict. Naturally, Musk swiftly deemed it “totally crazy”, as he took to his X platform to accuse her of “absolute corruption” and of being an “activist posing as a judge”.
And, of course, anyone who brings Musk down a peg or two will get plaudits in some parts. Like the man he’s just helped get re-elected, his orange playmate Donald Trump, Musk is a divisive figure: a bloke who can build Tesla and SpaceX and a bunch of other companies, while also going around labelling a cave diver a “pedo guy”, blowing $44 billion on Twitter (now X), telling advertisers to “go f*** yourself”, ramping crypto currencies and admitting to using ketamine. As for McCormick, she’s also shown she won’t be cowed by Musk’s political clout in a Trump administration.
None of that, though, is particularly relevant. In 2018, with Tesla valued at about $59 billion, the board handed Musk the biggest potential payday in US corporate history. To get it, though, he had to deliver the moon: lift Tesla’s market cap to $650 billion by 2028, while also hitting financial targets — either $175 billion of sales or $14 billion in underlying earnings. More than 70 per cent of investors backed the deal.
In fact, he got there in three years, with Tesla’s market value peaking at $1.2 trillion in 2021. True, it crashed after that for a bit, not helped by Musk’s Twitter distraction or by him selling shares to fund that deal. But, boosted by the second coming of The Donald, Tesla is today valued at $1.1 trillion — the reason his option package is now worth a lot more than $56 billion.
No question, Musk has kept his side of the bargain. Yet, after legal action from a single shareholder, the ex-thrash metal drummer Richard Tornetta, McCormick barred the payment in January. Siding with his view that the board had failed in its fiduciary duties, she said the deal was far too cosy, with Musk “enjoying thick ties” with the directors who awarded his pay.
So, under the chairwoman Robyn Denholm, Tesla reran the vote in June, making investors aware of McCormick’s ruling. This time, 72 per cent backed it, rubber-stamping an options deal that would lift Musk’s stake from almost 13 per cent to about 20 per cent. And maybe they were influenced by his toys-pram routine: his threat to take his as yet unproven AI genius to one of his other companies unless he got his moolah. But why should a court get to overrule for a second time the majority wish of a group’s owners?
McCormick said that Tesla, which in June shifted its incorporation to Texas, could not simply hit “reset”, using a fresh shareholder vote to overturn a legal ruling or “lawsuits would become interminable”. Yet, doesn’t that depend on the issue at stake? Since when has executive pay been a matter for the courts rather than the owners of a company? As Tesla, which is appealing, put it: “This ruling, if not overturned, means that judges and plaintiffs’ lawyers run Delaware companies rather than their rightful owners — the shareholders”. Like it or not, Musk deserves his obscene payday.
So much for watering down the listing rules. Britain still can’t attract Nik Storonsky. Who he? The Revolut boss who’s told the 20VC podcast that he’d sooner float the fintech outfit, ostensibly valued at $45 billion, in America. “I just don’t understand how the product which is being provided by the UK can compete with the product provided by the US,” he said, pointing to our far lower liquidity, not helped by the £3.3 billion of stamp duty on share trades.
Recent figures from Panmure Liberum tell a similar story. Analyst Joachim Klement says that, when it comes to IPOs, Britain is “living on a different planet”. In the US and Europe, “2024 is shaping up to be an above average year”. America has seen “$26.1 billion in IPOs in the first three quarters of 2024” versus “an annual full-year average of $26.8 billion for the last decade”, he says. In Europe, IPOs are up from “€4.3 billion in 2023 to €14.3 billion in the first three quarters of 2024” compared with an annual average in the past decade of €15.7 billion.
Yet, despite the likes of Raspberry Pi and Applied Nutrition, the UK IPO market has remained “all but closed for the third year in a row, the worst run in more than two decades”, with activity 91 per cent below the ten-year average.
Meantime, the market’s “a hunting ground for foreign investors to pick up the best companies at significant valuation discounts”. As he says, the “lights are flashing red”. Too much is riding on a float as contentious as the throwaway fashion group Shein.
Great news from the Office for Notional Statistics: Britain is even less productive than we thought. It’s found another 484,000 workers lurking about. And that doesn’t even include a 900,000-plus rise in net migration. Worse, that cheery news was overshadowed by the stats office’s admission that it needs another two years, out to 2027, to replace its discredited labour force survey: number-crunching crucial to interest rate decisions. Given that, how about transferring the job to an outfit we can count on?
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