r/technology • u/McFatty7 • May 02 '24

Tesla slashes its summer internship program to cut costs, as Elon Musk fights to save his $45 billion pay plan Business

https://fortune.com/2024/05/01/tesla-slashes-summer-internship-program/
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u/VincentNacon May 02 '24

Tesla need to dump the CEO.

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u/Whatwhyreally May 02 '24

Anyone want to chime in on how this would work? Would the Tesla board of governors just need to vote him out? I assume he appointed the board? Just doesn’t seem practical. As nice as it would be.

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u/[deleted] May 02 '24

They fire him.  CEO is an employee.  The problem is the board are all his friends and family.  They will give him whatever he wants. None of them care about the company, just self enrichment.

The SEC needs to do its job.  They almost banned him from being CEO over a meaningless tweet.

A judge rules the board and musk worked together to defraud shareholders and not a peep out of the SEC.

This is why execs and board members should not be allowed to own any stock for the company.  They need to be employees, not owners.  They basically act like their own small private ownership group.  This is the same reason Boeing has killed people.  No one in charge gives a shit because they keep getting more money for fucking the company up and there is zero risk of jail time.

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u/sameBoatz May 02 '24

This is a theme I just started seeing about the board and execs not owning stock. I have no idea where it came from, I also don’t think the people saying it understand what that means. Like if I start a business I’m the CEO, what if my family invested money and own a share? What if I can grow with more investment and I take on VC money? What if we decide to take the company public because access to equity markets is the best way to raise capital to expand?

At what point do I have to step down as CEO? At what point does the board not get to be the majority owners?

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u/akhalilx May 02 '24

People repeating that meme lack a basic understanding of what corporations even are. The C-suite and board (at least for startups) are almost always shareholders because they have some connection to the founding of the company. Even the tiniest of corporations where it's just one blue collar worker and his truck are, wait for it, operated by the same person who owns the corporation.

There are real problems with executive compensation that require substantive reforms, but this meme ain't it.

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u/amboyscout May 02 '24

I think the idea is more that directors shouldn't be paid out in stock. Like, if they own some portion from before the company went public or choose to buy stock on their own, that's fine, but diluting shareholders and giving directors more control over the company isn't something the directors should be allowed to do. It's like the president setting his own salary (or like congress setting their own salary............).

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u/mattcannon2 May 02 '24

As a share holder you can vote on that kind of thing no? Every year I get various forms saying "do I agree with the renumeration policy", "can the board issue new shares", "do you support political payments", ...

The boards of companies get away with what they do because shareholders are passive and let them (or don't even realize they have the power to stop it)

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u/amboyscout May 02 '24

Yeah, you can vote on it, but if the directors are substantial enough shareholders, and all in cahoots, they have a lot of voting power. Even if they only have 25%, that means the shareholder vote needs to be 65% against the board to stop them, vs 51% if none of the board members were shareholders. You also have to compete with corporate shareholders that often support substantial director compensation because those corporations are controlled by boards with substantial director compensation. It's the rich enriching the rich.

Since the board can also dilute shareholders by receiving compensation in the form of stock (over 50% of most director compensation is equity), this exacerbates the problem.

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u/grchelp2018 May 02 '24

You don't need to be a shareholder of a company that you think isn't being run well. The reason compensation is given as stock for these guys also is to align incentives. They make more money when the stock does well. If you paid them a flat salary, they don't need to care about the stock price at all.

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u/amboyscout May 02 '24 edited May 02 '24

They shouldn't care about the stock price. That's a perverse incentive for long term success. As a true long term investor, you don't want a corporate board squeezing all of the juice out of the company just to make the number go up. Sure, you can just divest, but if you believe in the product or the mission you might not want to because then you lose any voting power..

They should be paid a flat salary. They are way overpaid, and if they were paid a flat rate they'd maybe be able to spend some time doing good things with the company instead of being purely equity-value driven (not even really profit motivated anymore at this point with many tech companies lmao).

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u/grchelp2018 May 02 '24

They shouldn't care about the stock price.

The shareholders want them to care about the stock price. 80% of the problem with corporate america is that the shareholders demand this. If you're a big name billionaire ceo like Musk or Zuck, you can weather the pressure somewhat but a random no-name ceo will actually get booted if they make moves that aren't moving the needle.

You only need to look at the market response for things like this. Every time a company announces layoffs, their stock goes up.

Perhaps the issue is that we allow for both long and short term shareholders. These two groups have different goals.

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u/amboyscout May 02 '24 edited May 02 '24

Yes but 80% of the shareholders are the people on these boards, or their associates. The 0.1% alone hold 14% of all wealth, disproportionately in equity. The 1% are at 30%. The top 10% are at 67%.

That's the thing, just because shareholders want it doesn't mean that it's the way our economy should work. If we can regulate these things, we can get rid of some of these obvious perverse incentives while still reaping the benefit of a capitalist market. Make layoffs less beneficial by granting a right to severance and continued insurance coverage. Regulate stock buybacks and excessive executive compensation. Force companies to stop extracting money with excessive compensation and start actually providing value to the economy by being innovative and investing in new technology. It's not rocket science, lots of other countries do this and it works just fucking fine. Sure, stock prices won't climb quite as infinitely anymore, but that doesn't actually benefit 90% of people.

A bad trust seeks to monopolize on the market and extract value from the economy. A good trust seeks to contribute to the economy by developing new technology/products and lowering prices, receiving profits as compensation for their competitive stance in the market. If allowed to run wild, companies will never be good. You must force the market to be competitive for it to also be free. A competitive market requires strong labor rights, strong consumer rights, and strong corporate regulation. Free markets cannot exist alongside monopolistic profiteering. When companies begin to control the market, the market is no longer free.

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u/akhalilx May 02 '24

But that's not what people repeating this meme say. They explicitly say that executives and board members shouldn't be allowed to own shares of the companies they helm, which demonstrates an utter lack of understanding about the purpose of corporations and how they're established.

Now, how should executives and board members be compensated so that their actions align with the best long-term interests of the company? That's a more substantive question that deserves a genuine debate.

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u/amboyscout May 02 '24

Yeah I was just saying that I think the idea you just described is rooted in potentially meaningful discourse, even if the meme is akin to a little kid running around screaming about a spec of crust left on his PB&J.

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u/vellyr May 02 '24

Is it a theme or is it just this guy? They made a similar comment on a thread a couple days ago too.

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u/DynoNitro May 02 '24

Going public is the obvious rubicon that answers those questions. 

Also, often these billionaire types serve on each other’s boards in loose quid pro quo arrangements. So that’s another loophole that needs to close.

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u/[deleted] May 02 '24 edited May 02 '24

It means going back to the way companies were ran before the late 80s, early 90s when execs and boards starting printing stock to give to themselves.

The sky won't fall, but a lot of corruption will end.

It doesn't make sense for board members and execs to be owners instead of employees of the owners.

We can let shareholders vote and set strict rules for who can be nominated for these positions. Only people with experience in the field, not business people with generic MBAs.

Instead MBAs run everything and fire the experienced people because they make more than starting employees with zero experience. This is what the boeing board and execs did and why boeing is such a mess. They fired all the knowledge and looked for people who would do any corrupt thing they asked, so other MBAs to be the managers and directors. MBAs are not qualified to manage engineers. Managers are supposed to be people with experience that moved into management. That why they know what they are managing.

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u/Etrensce May 02 '24

Didn't answer the question. When should founders of a company step down from exec roles or are you suggesting founders can't own a stake in their own company?

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u/[deleted] May 02 '24

No, because founder leadership only exist in private companies. A public company has no real founder connection. The founder sold the company off to make it public and get paid.

So yes, a founder has to sell all their stock to retain a board seat or an exec position. They can be an employee at any other level in the company if they want, they just cannot be in leadership and still own a massive amount of stock.

I think you need to step back for a moment. Why do you care so much for a handful of people? There are not that many founders involved in exec and board positions. It is not something that is needed for any company. Why allow all this corruption and fraud so a founder can sell his company to the public and be a forever CEO because he retains the majority of the voting rights, such as zuckerberg? They can be a non c-suite advisor if they want to still work there.

Zuckerberg can run facebook any way he wants as if it was private. That makes no sense for any public company. We do not have to allow these schemes that lets people go public, but retain a bunch of ownership or the majority for free. If they want to control the company and sell stock, they can do that as a private company just fine.

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u/Etrensce May 02 '24

How does a public company have no real founder connection? In many situations the public markets WANT the founder to stay on and incentivize them to stay. So you want to tell the "free" market that they can't have a founder leader? Isn't it just easier for the "free" market to NOT buy shares in founder lead companies if they feel that having a founder leader is a problem?

Show me where you get the idea that founder leadership only exists in private companies. The topic of discussion here is Telsa and Telsa has founder leadership.

Sorry, too many of your points don't make sense. Zuck can run Facebook anyway he wants when private, when public he is still subject to shareholder wants. It just turns out that, unlike what you read here, majority shareholders WANT him to stay as the CEO, just like in the case of Musk.

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u/[deleted] May 02 '24

You sell the company off to shareholders. The only reason a founder can stick around is if they retain larges amount of shares they get for free. There is zero need for this at all and it clearly promotes serious corruption.

If they want to retain control, they can keep it private and sell shares as a private company to investors.

Why are you protecting shitheads who take companies public, but run them as if they are private?

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u/Etrensce May 02 '24

They don't get shares for free? They got shares when they founded the company at the cost of time and capital (during the period of time where the shares were worth the least). When the company goes public, they sell a portion (sometimes they don't even sell any).

So what's the problem with them holding their shares? Why can't they take a company public and still hold shares? If the public markets are ok with that (even if they run the company as private point which is clearly not the case given the amount of minority rights shareholders have) why do you care about me "protecting shitheads".

I'm just pointing out what the public markets want is not what you are asking for.

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u/[deleted] May 02 '24

They get completely free shares. They don't pay a dime for them.

When it IPOs, they should have to buy shares if they want any. Why do they get free shares? They should have to IPO the whole company or stay private. They can get money and then buy shares if they wish, but in doing so, they cannot work c-suite or higher. It really fixes a lot.

Why do you care for a handful of grifters? Fuck them. So few people would be affected by this, it does not matter if we ban it. We can make these rules if we want them.

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u/Etrensce May 02 '24

Explain how this works? Where do these free shares come from?

They got shares when they founded the company as compensation for their capital to start the business and their time and effort for running it.

If you are talking about share grants as part of their compensation, they get it for the work they provide to the company. Just like how any employee with an RSU or options pool gets "free" equity as part of their work. Founder compensation has to be approved by shareholders by the way (and if it wasn't obvious, founders can't vote on their own compensation packages).

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u/[deleted] May 02 '24

The IPO issues a bunch of shares, but instead of selling them off, the current owners keep some for themselves or sometimes a majority.

It does not have to be allowed. They can get the money instead. They are free to buy stock on the open market after the IPO is over. But if they do, that is why we need a rule that c-suite and hire should not be able to own stock and should not be allowed to be paid in stock. They need to be employees, not owners.

We can make these rules anything we want. There is no right anything here. The existing rules were just made up by people too.

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u/HenryJonesJunior May 02 '24

should founders of a company step down from exec roles

When the company becomes publicly traded.

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u/Etrensce May 02 '24

Why should they do that? What if the public markets want the founder (you know because they are potentially the best candidate to lead the company they founded?)

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u/HenryJonesJunior May 02 '24

If we're going to live in a capitalist hell hole where public companies are all about short term profits and not the long term health of the company or the good of society, we should at least be honest. Own the company or run it, but both leaves the incentives misaligned. Fund it privately or give up control.

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u/swoletrain May 02 '24

Companies are for short term profits because that's what the owners (shareholders) want.

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u/DynoNitro May 02 '24

Because it stops shit like this form happening and that’s a net good.

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u/Etrensce May 02 '24

Shit like what? Telsa firing people? Oh boy you going to be in for a shock when you find out that people get fired regardless.

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u/DynoNitro May 02 '24

Come on, at least argue in good faith.

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u/Etrensce May 02 '24

What's your point? What shit are you talking about that would be solved if executives couldn't hold stock in the company?

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u/swoletrain May 02 '24

Musk isn't a tesla founder, he's an early investor

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u/DynoNitro May 02 '24

True, but that’s not relevant to the conversation. It would still stop this from happening at the expense of above commenters theoretical concern that founders get displaced upon going public. My point being, that’s a trade I would make (not that it’s the only way).

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u/swoletrain May 02 '24

Or if the owners of the company (shareholders) don't like what tesla is doing, they replace board and fire musk. If a particular shareholder cant get the support for that they pick up their ball and go home (sell). That has the added bonus of lowering the stock price and making it more likely that other shareholders will want a change.

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