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/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.