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Just when I thought lawfare was out, they pull me back in.
So.. a Delaware judge has once again unilaterally decided to void Elon Musk's $50 billion pay package.
For those following along, the timeline goes something like this. The exact details may be a bit fuzzy, but I think I have the broad strokes correct:
Elon Musk and the board of Tesla sign a compensation agreement where if Tesla stock goes up by some outrageous amount, Elon Musk will get an enormous reward. But it it doesn't, Elon will get very little.
People laugh (ha!) because the targets are so outlandish that there is no way in a million years that Tesla could ever...
Tesla stock meets and exceeds the targets
Some asshat with like 8 shares of Tesla sues, claiming that the pay package harmed him even though the price of Tesla stock has gone up like 1000%.
A Delaware judge sides with the asshat and voids the compensation agreement.
Elon asks for a shareholder vote on the pay package and wins with 72% of the vote despite a politically motivated campaign to pressure big funds to vote against it.
It goes back to the judge who says, nope, still doesn't count.
The judge awards the lawyers for the plaintiffs $345 million
Basically what this means is that, if you register your company in Delaware, a judge can prevent you from making legally binding contracts. If you make the wrong enemies, your shares in a company can be stripped from you. The lawyers who sue you will make a fortune.
There's a folk belief in the United States that companies register in Delaware to avoid taxes somehow. I thought this myself, but when it came time to register my own company, I learned that this is not accurate. Registering in Delaware doesn't save you any money and actually costs you quite a bit ranging from maybe $300/year for a small corporation to perhaps $100,000 for large one. People register their companies in Delaware because there is the perception that there is a large body of case law that protects companies against frivolous lawsuits.
Obviously, this is over now. You'd be a fool to register a company in Delaware. To quote Paul Graham:
The one thing I will mention is that companies historically preferred Delaware's Chancery court because there was no chance of a jury trial (most states allow either side to demand and get a jury). The fact it would be a unilateral decision was the selling point, as that is thought to be much lower variance than a jury. I.e. you can predict what each judge is likely to decide based upon case law and their previous decisions. Even if their decisions are not what you want, the fact they are more predictable than a jury trial is valuable.
So this really should only be a problem if this is not consistently followed. But given expert lawyers in Delaware were predicting the outcome prior to the original trial probably indicates that Tesla should have been able to predict this and take steps accordingly (structure the deal differently, have more independence between the people putting together the deal and Musk etc.).
Texas I think does allow jury trials for their Business court, so whether that is going to be better may be a gamble.
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Your (3) and (4) are (chronologically speaking) in the wrong order. The award was granted in Jan 2018 and the lawsuit was filed in June 2018, long before the performance targets were hit. The lawsuit has taken a long time to resolve in part because shareholder suits like this in Delaware put a heavy burden on plaintiffs looking to reverse corporate decisions.
I hate to break it to you but this is every jurisdiction in the nation depending on the terms of the contract and (crucially for this case) how they were reached.
Fair enough. I guess the difference is the quality of the judges.
As someone pointed out recently, the Constitution was seen as a work of genius when applied to the United States. When essentially the same constitution was applied to Liberia, the results were quite different.
There is no law written so well that it can't be bent to any purpose. Roe v. Wade stood for nearly 50 years and was based on almost nothing but the desire of the Supreme Court to have abortion legal. Here in Washington State the Supreme Court ruled that a capital gains tax was not an "income tax". I'm sure they wrote pages and pages of legal justifications.
Well, no, it's not about the quality of the judges. The entire concept of a corporation is underpinned by the idea that the corporation exists as an independent entity from the owners, and that the owners, in turn, have a fiduciary duty to act in the best interests of the corporation. If this concept didn't exist then there would effectively be no corporations at all. Consider the following example: The founders of a company want to expand, and raise money by selling 49% of the company's stock and retaining a controlling interest among themselves. The founders hold key executive positions and the majority of the board seats. The stock sale raises 20 million dollars of investor money. Instead of investing it in the company, however, they split the 20 million among themselves as bonuses. Then, they go even further and vote to liquidate the company's assets and use the proceeds to pay themselves bonuses.
Obviously, if companies could do this nobody would invest in them. The Tesla situation isn't this egregious but the circumstances were enough to trigger additional court scrutiny. It isn't controversial to suggest that Musk has a disproportionate influence over Tesla; no judge is buying the "I just work here" argument. and the amount of the bonus was far, far beyond anything within the realm of what could be considered reasonable. It's easy to lose sight of thing when the numbers get this big and we're talking about the superwealthy, but 54 billion is a lot of money. It's about 25% larger than Ford's total market cap. It's in the neighborhood of the market caps of major companies like Allstate, Target, and Phillips 66. You can understand why the court might be concerned that paying an amount of money that could be used to create a Fortune 500 company from scratch as a bonus might not be in the best interest of the company, and why there might have been a bit of self-dealing involved.
It didn't end there, though. Musk still could have won the suit had he simply disclosed his relationship with certain key players, but he didn't, which raised the question of whether the shareholders were sufficiently informed, and was enough to void the transaction. The fact that the shareholders voted to uphold the deal at a later date is irrelevant, because there's no mechanism in the law for it.
I don't think there's an argument that the judge viewed the $56 billion compensation as too large due too its absolute size.
Why? Because if we're using the absolute size of the reward as the metric (and not relative size) then the same logic must apply to the plaintiff's lawyers. But it clearly didn't as they stand to be so enriched by this lawsuit that it will rank among the largest awards ever given to a legal team. (Possibly even the highest payment ever for a non class-action suit). Clearly, the judge is not against gigantic rewards in principle.
Nor should she be. The market cap of a dying company like Ford has little bearing on the market cap of Tesla. There's little doubt that Tesla's market cap is almost entirely dependent on Musk's involvement with the company. Getting 5% of the market cap gains for himself does not seem unreasonable.
I grant that there are legal peculiarities here that make the judge's ruling sensible on some level. But, on another level, it's clearly a miscarriage of justice since there was no harm done to shareholders (in fact, they have done extremely well) and the reward was also clearly what the shareholders wanted (having voted on it).
I suppose we can debate the twists and turns that led to this decision (and the monstrous reward given to the lawyers) but the end result is still the same: it's the wrong result. It doesn't fill me with confidence in the supposedly great legal environment of Delaware. Although I do agree with a different poster that a judge trial, even in deep blue Delaware, is likely to have a better result than a jury trial in a case like this.
The judge did apply the same logic to the attorney's fees. The Plaintiffs were originally asking for a contingency fee based on 11% of the amount of money they saved the shareholders, which came out close to 7 billion. It should be noted that they were already applying a significant discount factor to the 33% they would be entitled to under the standard formula. The judge knocked this amount down even further, precisely for the reason that the total dollar amount was so high, even if what they were asking for wasn't a lot in comparison to the total amount at issue. She went on to explain that while courts have adopted various guidelines to determine reasonable compensation, the judge has the ultimate authority to make that determination. She then adopts the alternative valuation formula that Tesla asked for.
The court doesn't doubt this, but the defendants made this argument, and it was rejected nonetheless. The problem the court noted was the absence of any element of bargain from the transaction. In a typical executive compensation package, the idea is that you want the CEO or whoever to have some skin in the game, and at the same time you don't want to lose him to another company, so you offer a compensation package wherein he gets stock options commensurate with increases in the company's valuation. the shareholders benefit because the CEO has skin in the game and they won't lose a good CEO to a better offer. The record in this case doesn't support the contention that that was an issue. The first thing they noted was that since Musk already had a 20% stake in the company, he already had sufficient incentive to meet the benchmarks. But beyond that, he never gave any indication that he'd leave the company or dedicate less time to it without additional compensation. The defense tried to argue that the additional compensation was needed to keep Musk from getting distracted by other ventures, but Musk himself testified that the package had no influence on how much time he spent working on Tesla. The court also noted the absence of any concurrent obligation for him to dedicate any amount of time to Tesla.
Beyond that, though, the biggest problem the court seemed to have with the package is that there was no real negotiation. From the record, it looks like Musk decided what he wanted, drew up the terms for it, asked the board for it, and got it without any pushback. No one on the Compensation Committee ever offered any counterproposals or questioned any of the terms. Musk himself made several changes backing off the amount of compensation, but he admitted that these were of his own volition and not because anyone at the company suggested that his initial proposal was too rich. When you admit that you were "negotiating with yourself" in court, it doesn't create the impression of an arms-length transaction.
The defense tried to make this argument, too, and it failed, for reasons related to those above. The fact that the shareholders have done well is irrelevant to the argument since the defense failed to show that the compensation agreement had anything to do with the increase in share price. Musk wasn't even working at the company full-time throughout the relevant time period. If the shareholders would have got rich anyway, then the harm is that 55 billion that could be invested into the company is going to one person who can do whatever he wants with it. As for the stockholder vote, you need to understand the posture of the case:
If this is a normal company where the CEO and board are independent and no one person holds a disproportionate amount of stock, the deal is going to be presumed valid so long as there is a reasonable business justification. In this case, though, it was clear that everyone in the company was more or less subordinate to Musk, as was evidenced by numerous examples presented in the record. Since he had so much influence, the court has to exercise a heightened standard of scrutiny where it determines if the deal was fair.
The burden of proving the deal was fair initially rests on the defendant, but it can shift that burden to the plaintiff if it can show that the shareholders approved the deal. This is what Tesla tried to do. The problem was that the company didn't disclose all of the inherent conflicts to the shareholders. This may seem like a petty, technical argument, but the court makes it clear that this isn't some kind of gotcha where they forgot to list one thing and their whole case goes to shit. It finds that there were numerous, material failures to disclose serious conflicts.
Since they failed to make the required disclosures, the stockholder vote was rendered meaningless, and the defendants retained the burden of having to independently prove that this was a fair business deal. Since, for the reasons stated above, they couldn't do that, they lost the case.
You need to get the idea out of your head that there's some sort of tribal component to this and that the judge just ignored the law to spite Elon Musk. Corporate law is incredibly complicated and can't be boiled down to a few common sense rules like "if there was a vote then it should stand", because that's not how it works. This level of complexity is precisely why companies choose to not only incorporate in Delaware but usually specify in the corporate bylaws that the Delaware Chancery Court has exclusive jurisdiction over claims arising thereunder, and why they will continue doing so. Yes, you can incorporate in other states, and for smaller companies it makes sense to just incorporate where you do most of your business. But if you get past a certain size or plan on going public then it makes sense to incorporate in Delaware, for the simple reason that the law there is well-developed and the Chancery Court is experienced in handling complex corporate cases. Say you incorporate in Pennsylvania. Venue rules are pretty loose here, and there's a decent chance that that derivative suit will be filed in a remote county and heard by a hick judge who's never handled a corporate case involving a public company before.
In this situation, there's a good chance that he's going to be 100% relying on the information presented in your briefs to educate him on what the law is, and there's a 50% chance that he doesn't actually read them and just asks the lawyers to explain everything to him in open court. If it's filed in a big city then you might get a judge with some corporate experience but just enough to think he doesn't have to read the briefs. He'll also have 7,000 cases on his docket and he'll repeatedly tell you to work something out among yourselves, and in the event the case actually goes to trial he'll ask you if you're going to be finished soon five minutes into your opening statement. I exaggerate, of course, but these are both very different environments than working in a court with a limited docket that handles corporate cases almost exclusively. This case generated a 200 page post-trial opinion. File in state court and you'll get "I rule in favor of the plaintiff" and maybe a brief explanation from the bench if you're lucky. In the rare event that the judge feels the need to issue a written opinion it will be a few double-spaced pages that offer only the barest legal analysis.
As far as Musk is concerned, Texas has tried to remedy this with the Texas Business Court, a similar court that is limited to high-value corporate cases and keeps a light docket, but they just started hearing cases in September and it remains to be seen whether it will develop similarly to the Delaware Chancery Court. The enabling legislation doesn't limit jurisdiction to corporate cases, but to any litigation where the amount in dispute is more than 5 million, so it could certainly become a hellhole for mass torts, but maybe that was the intention. And while you mention that a judge is better than a jury, it's worth pointing out that juries are never used in these types of cases. There are technically two types of courts: Courts of law and courts of equity. Courts of law have judges and juries and the only remedy it can impose is money damages. At common law, courts could only award damages, so if you wanted to force someone to do something (or refrain from doing something), it required an order from the king. Kings delegated this authority to chancellors, who established chancery courts who could do things like issue injunctions, orders for specific performance of a contract, and other so-called "equitable remedies". Most jurisdictions have merged these two courts, but Delaware retains the distinction for some purposes. Given that the remedy sought in this case, recission, is equitable rather than legal, only a judge could award it.
During the relevant time period Tesla nearly went bankrupt, they had massive production delays and had set up assembly lines in tents, and Musk was sleeping in the factory. He could have been working at his other companies, namely SpaceX and OpenAI.
Sure, after that things were smooth sailing. But he could have spent his time on other stuff. If this ruling holds, Musk's current 17 or so percent of Tesla is worth about as much as his 40 percent stake in SpaceX given the current evaluation of >350 billion. There was a massive opportunity cost in spending that time at Tesla. Around that time he co-founded OpenAI, perhaps if he had more time to spend on OpenAI it would have been a better use of his time. Since the first ruling he founded a new AI startup that is currently worth over 50 billion dollars. In a very real sense, Musk could have created that much value in numerous other ways, his wealth wasn't necessarily as tied to Tesla as you might think.
More than that, it's unjust. When he made the contract it seemed absurd. He would take this horrible company and get rewarded for every 50 billion dollars he added to the market cap. It was a tremendous deal to the share holders, 1% of the company each time he increases it's starting value by over 100%. We know the opportunity cost of Musk's time. His other companies at the time included openAI, and SpaceX. There was in fact a massive opportunity cost, which is further demonstrated by xAI.
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Heading off on a bit of a tangent, why the fuck are the courts giving legal advantages to fickle mercenaries? The last thing I'd want to do if I was creating a legal system is punish people for being dependable and committed, but here we are: Musk was dependable and committed, therefore he didn't have the right to as much compensation as an outsider would have.
It's because of the rule that for-profit corporations are supposed to
be maximally evilwork only for the profit of their shareholders.This rule is there because without it, there's a major principal-agent problem with executives looting a company and stiffing the shareholders, or abusing company resources for personal/ideological projects (e.g. ESG), and that problem strongly discourages investment which slows down the capitalist engine by a lot. It's a shitty solution, but the other solutions are also shitty (the most-popular alternative is some form of socialism or fascism where private capital doing what it wants is not a thing).
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Does he have any appeals left and is he taking them?
Quoth the NYT:
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Huge tax implications for Musk, also a large short term accounting hit to Tesla.
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That the decision looks "boring" on some level says nothing about the motivation for it. It is not uncommon for arbitrary authority to cloak itself in the trappings of inevitable procedure... even when another authority could have come to a completely opposite decision based on the same procedure.
Anyway, it's $55B, not $10B, and if they'd awarded him a new grant there would have been various negaive accounting and tax consequences and in any case, there would immediately be a second shareholder lawsuit on the grounds that since the company had no obligation to pay Musk anything at all, the new grant constituted a gift to him and a violation of Tesla's fiduciary duty to its shareholders.
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This surprises me because Tesla clearly believed that the shareholder vote meant something. Are they idiots? I doubt it.
But even if this appeal was decided on boring procedural grounds, the original decision was very much about a woke judge sticking it to Musk.
And the judge could have at least limited the lawyers fees to something reasonable to prevent moral hazard.
If your read the opinion from the judge it's clear that, yes, Tesla was dumb in the way they went about it. If Tesla had done a shareholder vote at any point in the five years this lawsuit was ongoing, that could have ratified the package. Instead Tesla waited until they had lost and then did the shareholder vote to try and get the judge to reverse her decision. She also points out independent reasons why the shareholder vote wouldn't have the ratifying effect Tesla wants, including that the proxy statement for it contains material and misleading statements.
The opinion is monumentally dumb, departing from the three prior rulings which wisely declined not to tread in this shaky ground and "going boldly where no man has gone before" to absolutely violate the fuck out of federal labor law. The judge flat out admits this rescission leaves Musk uncompensated for five years of labor, cloaking it in the fig leave of "well he made a bunch of money on the stock he already owned." That's not how employment law works- employees, including CEOs, must be compensated for their labor, this is a bedrock principle of America, we even have a fucking constitutional ammendment about it.
The judge can rule it was an unfair agreement, but to abrogate responsibility to determine fairness (with a piss-poor cite to another case about bonus claw backs where employees were still paid salaries) and simply say "nope, actually slavery is fine" because she didn't like how Tesla argued the case is gross misconduct.
I get that Musk is not a sympathetic plaintiff, and I get that Tesla didnt take this seriously, but the fact that a judge can rescind a mutually agreed upon contract and leave an employee with zero dollars for five years of work and no one is making a bigger deal of it is fucking mind blowing to me. This is the kind of precedent that kills democracy. At the very least, Deleware suddenly became a very unattractive state to incorporate in.
I mean, it becomes a very unattractive state to any company that doesn't obey the party. If they can keep alternatives from developing, this is just another win win for them.
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I mean.. maybe. But why would they do a shareholder vote to immunize themselves against a frivolous, politically-motivated lawsuit filed by a guy who had 8 shares of Tesla? Shareholder votes are not free.
And would the judge have really listened to the vote anyway? It's easy for her to say now. I'll admit I really don't have a lot of patience for the legal details when it seems that judges just use them as justifications for doing the things they were going to do anyway.
What is the evidence that the plaintiff of judge are politically motivated? "Company fails to take lawsuit seriously, gets wrecked" does not sound like a crazy thing? I would probably describe the Hogan-Gawker lawsuit similarly.
It's not just the judge saying this, she cites a bunch of Delaware precedent that votes during litigation can function as ratification for the corporate acts in question. Tesla (for obvious reasons) cannot find a single precedent that post-judgement shareholder votes can serve as a basis for overturning that judgement.
Yes, by begging the question and assuming that the judge is correct on all aspects, then clearly Tesla is in the wrong here.
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The evidence is that it’s absurd to bring a lawsuit against a company that made you a ton of money?
That hadn't happened when the lawsuit was filed. OP gets the order of events wrong. The lawsuit was filed 5 months after the package was awarded, well before performance targets were hit.
It's even more absurd to bring a lawsuit against a company for either making you a ton of money (if targets, which included market cap, are hit) or getting its CEO to work for you for free (if they aren't).
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Why did the plaintiffs' lawyers get so much money?
The judge "saved" Tesla shareholders $50 billion so $345 million is just a small amount of that.
Presumably many lawyers could have done that. Wouldn't it make more sense to pay them for the time and effort expended?
I commented about this above, but to reiterate: The lawyers accepted the case on a contingency basis. Since the lawyers take on a considerable amount of risk by working on contingency, they're entitled to compensation beyond what they would get for time and effort expended, defined in terms of a percentage of the settlement. Delaware law provides guidelines for how attorney's fees are to be calculated in these kinds of cases, but attorney's fees are always subject to court approval for reasonableness. A strict reading of one test entitles the attorneys to get (roughly, I'm going from memory) 10% of the amount saved if the case is settled early, 20% if the case is settled after discovery, and the full third if the case goes to trial. By that test, the attorneys in this case would theoretically be entitled to something like 18 billion, but they knew there was no way in hell the judge would ever agree to that, so instead they asked for something like 6 billion, based on some byzantine calculation where they used various discount rates to claim they were entitled to 11% of the total. The judge still disagreed, saying they were nuts to assume that kind of windfall based solely on the unusually high value of the case. The judge did agree that the number was going to be high: She pointed to the fact that the litigation took 6 years and was disrupted numerous times (most notably by COVID and Musk's acquisition of Twitter), that they billed 20,000 hours, that numerous experts were required, numerous people had to be deposed, an inordinate amount of records had to be examined, and the issues involved were incredibly complicated. She then looked at the counterproposal from the defendants, which suggested that they should instead get 15% of some lower number I'm not entirely sure how they arrived that. The judge accepted that proposal.
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Lawyers (at least by their own reckoning) are difficult to bill. If they spend 2 hours writing a letter that convinces the opposition to give up a case worth $50bn, but they say they spent 200 hours researching in preparation, do you bill them for the time spent writing or the time spent researching, and how do you get proof of the latter?
In practice, corporate lawyers tend to be paid per job and per concrete action, but they charge huge amounts for those to offset the intangible/unprovable work done. The amount is basically a function of how much money is floating around the case.
Thus $50 billion turns into $300 million, of which the majority will go to the partners of the firm, and then to the taxman (at least in the UK) before it reaches the individual lawyers involved in the case. Still a very nice payout though.
I read read somewhere that it works out to about $17,000 an hour.
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Wait til you hear about real estate agents.
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Yes, of course. Welcome to the American legal system.
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Isn't Tesla's registration moving to Texas for exactly that reason?
Yes, but in today's money talk, Matt Levine spoke about the tax implications of a new contract in Texas. In short, a new contract in Texas will have massively negative tax implications.
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Yes. The bigger problem for Delaware, of course, is the future companies that won't register in Delaware.
Delaware's state budget is around $6 billion. There are 2 million companies registered there. It's quite possible that a large percentage of the state budget is paid for by franchise and registration fees.
Personally, I found the whole rationale for registering in Delaware pretty facile in the first place. You already have to register in the state in which you have your physical headquarters. So there's little reason to add a second state into the mix, exposing you to additional risk.
This one judge will likely cost the state billions in future revenue because of Elon Derangement Syndrome.
The reason that Delaware was the home for most publicly traded companies is that the state was one of the first to enact business-friendly structured corporate governance statutes, giving companies a predictable legal environment to work with. This also let Delaware develop a more mature tapestry of corporate caselaw earlier than other states, lending even more legal predictability. And once everyone started registering in Delaware, it was seen as displaying a lack of corporate sophistication to register in some backwater, lawless jurisdiction like New York or California.
Having anti-business, activist judges making these kinds of decisions is not great for Delaware’s reputatio , but how many executive comp packages are or ever will be even remotely close to this kind of absurd number. I would be surprised if this fact pattern ever reappears. Musk will get his payout under the Texas reorganization, so this is a relatively hollow victory for everyone except Plaintiffs’ counsel.
It's totally plausible that Musk will ask for another similar contract. I think he's mentioned that. Getting from 50 billion to 1 trillion is much bigger deal than getting it from 1 trillion to say 5 trillion. He could reaosnably request a new contract where he's rewarded with options equal to 1% of the company for every 250 billion he adds to the market cap. It's more plausible than his last contract. He merges xAI with Tesla, gets Tesla's GPU business going, FSD seems to be making massive improvements in the past months, maybe robotics and boom, your at 5 trillion, it certainly more plausible than getting Tesla from 47 billion (which was seen as overvalued) to 1 trillion. So another contract like this is totally plausible.
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The fact pattern may not recur with those numbers, but it will recur with ever smaller numbers being seen as out of bounds.
Which honestly it should. Elon is a bad example in that Tesla wouldn't be where it is today without him, it's overvalued because of his perceived genius.
But look at GM and Ford! Tesla's direct competitors! Each CEO makes over $28mm, while they ceded the American passenger car market entirely to Honda and Toyota (among others). Honda and Toyota paid their CEOs $3mm and $6mm.
US executive pay is off the charts level of crazy. UK and European companies have CEOs rarely being paid more than $5 million or so and I don't think the quality of the people who become CEOs themselves is significantly better over the pond than here.
Fun fact: British American Tobacco (BAT), a large FTSE 100 company has an American Subsidary called Reynolds. The Finance Director of Reynolds, never mind the CEO, gets paid more than the global CEO of BAT based in London...
I'll try to steelman the high pay.
Let's take Musk. In the counterfactual where he leaves Tesla in 2018, the stock is down at least 95% from its current levels. So he gets paid $56 billion for generating something like $950 billion in shareholder value. I think that's fair.
What's the situation like in Europe? Well, it's grim. Twitter search sucks, but I saw a graphic comparing new companies started after 1980 in the US vs Europe. The US has huge numbers of huge new companies. The EU has only a handful of new companies that have reached a market cap of $10 billion. The US has something like 50 times as many, and the ones that do exist are much larger.
Edit: Found the chart
There's no reason to give a European CEO high pay. They are mere shopminders who are so hamstrung by regulations they can't build a big company anyway. You can't grow a redwood in barren soil.
What I can't steelman is high CEO pay for people like Mary Barra or Marissa Mayer who do an awful job as CEO, do real damage to their companies, and still get paid hundreds of millions of dollars.
Aren’t most CEOs compensated in equity/options, precisely to align their incentives with those of their shareholders? A CEO who is paid in shares, or in at-the-money call options struck at the beginning of her tenure will, by definition, stand to make no money by tanking her company’s share price.
I don’t know the details of the two cases you mentioned, but potentially the steelman is that from the perspective of shareholders/the board of directors/whoever decides executive comp, hiring these folks was a positive EV bet ex ante, which turned out to be a dud ex post. That a given instance of a positive EV bet pays out negative is not evidence that taking the bet was a bad decision.
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I don't understand it! Especially where foreign companies are clearly outperforming American companies, why wouldn't GM target a rising Toyota exec and offer him twice what a Toyota CEO would make but half what the incompetent GM CEO makes?
You're assuming that CEO competence is unlimited in its range and potential. It could be that decisions CEOs make are fairly obvious and simple ones, that their skillsets are only somewhat more demanding than those of any other top tier professional, and that a lot of the variance of outcomes between companies comes down to more structural matters than whose at the helm. If business churn is more about structuralism than great man theory, then there are diminishing returns for attempting to poach talent.
No, I'm assuming the opposite!
I'm saying that there's no way Mary Barra is worth four times as much as Toyota's CEO.
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Isn't Toyota still family-run?
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You could even try to poach the literal Toyota CEO with twice his current salary... Even if he's meh at GM you've still destabilised your competition somewhat by taking away their sitting CEO. That alone is probably worth it.
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None, presumably. But Delaware's friendly case law reputation is now shattered. I'll posit that it was never real. Companies registered in Delaware because that's what other companies did. It was always bullshit.
The opposite now. But registering in NY or CA would be foolish as well, for obvious reasons. Small red states like Wyoming and South Dakota will replace Delaware as the go-to place for corporate registrations and have a much more credible case as defenders of the rule of law.
I create corporations from time to time and know others who do as well, and yeah, South Dakota is apparently hot right now.
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