The 9 Shares that Held a $56 Billion Fortune Hostage
The Fennel Newsletter
It’s February, which means the Fennel Newsletter is officially 1 year old.
We’d like to thank all of our readers who have been with us for this journey. In the past year alone, not only did we start this newsletter, we also launched our app, grabbed people’s attention with our Behind Closed Doors campaign, ranked as one of Fast Co.’s Most Innovative Companies of 2023, had our TV debut, and more.
The last year has truly been a wild ride, and we’re so happy we got to share it with you.
Now, how many of you got us a birthday present?
What We’re Talking About
The case against Elon Musk’s $56 billion pay package (Yahoo Finance)
What happened: In 2018, the board of Tesla drafted an executive pay package for Elon Musk, granting him about 1% of Tesla’s equity every time the company achieved one of 12 escalating corporate goals (like passing market cap benchmarks, growing revenue to a certain point, etc.).
While performance-based incentive pay isn’t that unusual for CEO compensation, what was unusual was the sheer dollar amount this pay package ended up being worth — $56 billion — due to the rapidly increasing value of Tesla’s stock.
Over the next few years, Tesla achieved all 12 of those goals, which meant Musk was awarded billions of dollars worth of shares — making one of the world’s richest people even richer.
However, one Tesla shareholder saw the pay package as problematic and sued Tesla back in 2018. After a years-long legal battle, the Delaware judge presiding over the case ruled that the pay package was, in fact, illegal.
Why we care: If you’ve paid attention to Fennel content, you probably know that we like to talk about executive pay, especially when it comes to asking “how much is too much?”
As the Delaware judge noted, Musk’s $56 billion compensation package was the largest ever in public corporate history. Not only that, $56 billion reflects about 89% of Tesla’s gross profits from 2019–2023.
This begs the question, is it worth it to pay Elon Musk that much money to be CEO? Paying him 1% of that ($560 million) would still rank him as one of the highest paid CEOs. And on top of that, would it be more beneficial to the company and its shareholders if that money/equity was allocated elsewhere? This line of questioning was explored throughout the case.
But perhaps the most remarkable detail about this case is that the shareholder who originally filed the lawsuit only had 9 shares of Tesla stock. Those 9 shares put a $56 billion fortune in jeopardy.
Next time you’re wondering if your modest portfolio means anything to huge publicly traded companies, just remember those 9 shares.
Shareholder Votes
Should Apple report on its procedures around app removals? (Feb 28) — If you have an iPhone, iPad, or other mobile Apple device, you’re probably used to getting new apps by downloading them from the App Store. After all, it’s pretty much the main way Apple users get their apps.
And as the iPhone grows in popularity across the world, Apple still maintains tight control over what is allowed in its App Store. That means any developer trying to get their app on iPhones — which make up 28% of global smartphone market share and 61% in the US — has to do so according to Apple’s rules.
Some people think this App Store control resembles a monopoly. If you want proof, look no further than the Epic Games lawsuit against Apple and Google. Now, a group of shareholders from conservative organization American Family Association are asking Apple to provide more context surrounding how it curates content in its App Store, specifically surrounding the removal of apps.
The group cites a certain instance when Apple removed Bible- and Quran-related apps in the Chinese version of the App Store. The group also brought up Elon Musk’s concern that Twitter (or X) would be removed from the App Store. Apple responded by saying that it has to comply with local laws, that it clearly states its rules surrounding what is and isn’t allowed on the App Store, and that it allows developers to file an appeal if their app gets removed.
Still, Apple is effectively the guardian that gets to decide what goes on (and what doesn’t) its devices. But is this control too much?
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