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The week's question
In December 2024, in the thread "Re: BRK: Why Not XOM?", BreckHutHigh asked the members: "What about the long road trips with kids?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
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Author: mungofitch 🐝🐝🐝 GOLD
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Number: of 21942 
Subject: Re: 13F : More Chevron
Date: 02/22/24 4:14 AM
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No. of Recommendations: 22
It was fully disclosed, I remember being very surprised, but if you didn't like the agreement, don't buy TSLA simple.

Sounds good, but it's not a good enough excuse.

Recall that the issue that the Chancery had with the deal wasn't that it was too much pay, but that the compensation committee was in effect negligent of their duty in failing to negotiate the deal--that they were acting “almost as an advisory body” to Musk rather than as an independent negotiator. Paraphrasing, they ruled that the board was supine and in effect controlled by Mr Musk, therefore there was no counterparty when the deal was "negotiated". The key smoking gun was the quote from the head of the comp committee, included in the judgment twice: “We were not on different sides of things. We were trying to make sure if we were going to go through this exercise that he was on board.” In short, it was a stitch-up.

If the board didn't do its duty and an agreement was not properly negotiated, it doesn't matter who later does or does not take issue with it.

Most especially if they are not fully informed. Part of the precis from Denton's:
"The Chancellor faulted the Compensation Committee and the board for not considering alternatives, failing to conduct a customary benchmarking analysis, and not assessing whether the grant was necessary to meet the company’s purposes. She also found that the burden of proving entire fairness remained with the defendants despite a vote of the stockholders approving the grant, because the relevant proxy statement was deficient for failing to disclose, among other things, the relationships of a majority of the board with Musk that called into question their independence and projections showing that the company expected to meet the milestones for Musk’s compensation. Without such information she found the stockholder vote was not fully informed."
(emphasis mine)

The ruling wasn't "your pay was too high", more like "your board is a joke, so the process was too".

Oddly enough, my beef with the deal is rarely mentioned. Assume for a moment that the pay deal was OK for compensation of the boss of a big company.
But Mr Musk only has a part time job there!

Jim
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This community has written 21,448 posts about Berkshire Hathaway. The article-length ones it recommended most:
BRK: Why Not XOM? · 62 recs · 2024
Second quarter comments · 60 recs · 2023
Berkshire's Profit Contributors · 57 recs · 2023
Summary of 2Q 2026 · 54 recs · 2026
3Q Summary · 53 recs · 2024
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