Elon Musk’s grotesque distortion of capitalism

In 2018, Elon Musk got the richest pay package in U.S. corporate history, then worth some $56 billion.

Nearly three months ago, a Delaware court voided that pay package, finding that the process to decide on it was “deeply flawed” because Tesla’s board didn’t properly disclose it to investors and had “barely any evidence of negotiations at all” with Musk.

Musk effectively decided on his own that he’d be paid $56 billion.

Last Wednesday, Tesla’s board said it would ask shareholders to vote again on that same pay package (now valued at about $47 billion) at its annual meeting on June 13.

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In a letter to shareholders intended to justify the pay package, Robyn Denholm, Tesla’s chair, wrote:

Because the Delaware Court second-guessed your decision, Elon has not been paid for any of his work for Tesla for the past six years that has helped to generate significant growth and shareholder value. That strikes us — and the many stockholders from whom we already have heard — as fundamentally unfair, and inconsistent with the will of stockholders who voted for it.

Fundamentally unfair that Musk hasn’t yet been paid a $56 billion pay package that a court found to be illegal?

It didn’t stop him from selling $23 billion worth of stock and pledging hundreds of millions of existing shares against personal loans to finance his gonzo purchase of Twitter (now X).

Speaking of unfairness, Musk is extorting Tesla by implying that if shareholders refuse to sign off on his giant compensation package, he’ll devote more of his time to his other businesses, like SpaceX or his xAI startup.

The extortion began with the 2018 pay package, according to the Delaware court. The judge cited a meeting at which the board planned to ask Musk to commit a minimum amount of time to Tesla but chickened out because, according to one participant, “that would have been like saying goodbye to Elon.”

Tesla is already suffering from Musk’s lack of focus. Its slumping sales have erased billions off its market value in recent months. On Tuesday, it posted $21.3 billion in revenue, a 9 percent drop year over year — marking its biggest decline since 2012.

True to form, Musk is furious that the Delaware court nixed his giant pay package. “Never incorporate your company in the state of Delaware,” Musk said on X after the ruling, adding: “I recommend incorporating in Nevada or Texas if you prefer shareholders to decide matters.”

So he’s also having Tesla shareholders vote to move Tesla’s incorporation to Texas, where he can grab even more of Tesla’s profits for himself.

Musk doesn’t want an independent board of directors — which, according to the Delaware court, is why his pay package is the richest in corporate history.

According to the court, board chair Denholm will do whatever Musk wants because he’s rewarded her so generously. She cashed in stock options in 2021 and 2022 for $426 million, describing it as “life-changing.” (It was revealed in an SEC filing that Denholm plans to sell additional stock options expiring on August 16, worth $53 million.)

The judge also found that Tesla director James Murdoch (son of Rupert) is not independent due to his long-standing personal friendship with Musk, including going on joint family holidays. And board member Kimbal Musk is, well, Elon’s brother.

While we’re on the subject of fairness, what about Tesla’s mass layoffs last week?

A week ago Monday, Tesla announced it was laying off around 10 percent of its workforce, or roughly 14,000 people.

Last Tuesday, affected employees discovered they no longer had jobs because their keys to get into the Tesla parking lot didn’t work. Showing up to work only to be sent home is a hell of a way of firing someone, but it’s just like how Musk handled mass firings at Twitter.

Tesla appears to be offering workers two months of severance — the legal minimum — meaning that workers will be paid through June 14. In order to receive severance pay, laid-off workers must agree not to participate in any lawsuit or mass arbitration against the company or publicly defame Tesla.

The mass layoff went about as poorly as you might expect for a company that operates at the whim of its mercurial CEO.

American capitalism is coming apart because of people like Elon Musk, who insists on getting the largest pay package in corporate history while extorting his shareholders and shafting his workers.

Boards of directors are supposed to represent and protect shareholders, but Musk doesn’t want an independent board. Unions represent and protect workers, but Musk has used illegal means to fight off a union, according to the National Labor Relations Board.

Most of all, Musk rejects the entire concept of fairness. To him, it’s all about money. But fairness is the bedrock of capitalism. If most people come to believe that the system is rigged for the benefit of mercurial idiot savants and unprincipled robber barons, they will not support it.

History tells us that social upheavals sometimes lead to fairer systems, but they have sometimes fueled authoritarian strongmen.

Both Elon Musk and Donald Trump are sociopathic leaders who demand vast wealth and power, scoff at norms, want total control, and have no regard for anyone but themselves.

They are the antithesis of the common good.

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Robert Reich is a professor at Berkeley and was secretary of labor under Bill Clinton. You can find his writing at https://robertreich.substack.com/.