Original Author: Min Jiang
In the U.S. capital market, retail investors have achieved a significant victory, with nine shareholders suing and winning against Musk.
The Tesla board of directors approved a long-term compensation plan for Musk in 2018. The plan established 12 tiered targets, and for each target completed, Musk could receive corresponding stock option incentives.
So far, according to the relevant assessment results, Musk has received 30.3 million stock options in Tesla, adjusted for the company's stock split. Based on the closing stock market price on January 30, the net present value of this part of the equity incentive is approximately $51 billion.
However, Tesla's small shareholder Richard Tornetta filed a lawsuit in court, as the plaintiff, arguing that the compensation amount for Musk was too high and that the Tesla board of directors was not independent enough to protect the interests of shareholders.
On January 30, Chief Judge of the Delaware Court of Chancery, Kathaleen McCormick, ruled that the process by which the Tesla board of directors approved Musk's compensation in 2018 was dominated by Musk, and the board could not prove that the compensation pricing was reasonable or that the decision-making process was fair. As a result, Musk's compensation package of over $5 billion was declared invalid.
Advertisement
However, Musk can still seek a reversal through an appeal.
A disheartened Musk posted on social media, stating, "Never incorporate your company in Delaware."
Unlike A-shares, which require a minimum of one lot, or 100 shares, U.S. stock trading does not have a unified minimum quantity limit. Even if you only buy one share, you are a shareholder of the company.
Although Richard Tornetta only owns nine shares of Tesla, currently worth over $1,600, he still exercised his shareholder rights and said "No" to potential unreasonable aspects within the company.In this case, we should not view it through the lens of a "conspiracy theory," suggesting that Biden is targeting Musk (who previously hinted at supporting Trump) during a U.S. election year. After all, judicial trials adhere to regulations and procedures, and there is no concrete evidence to support such a claim.
It is also incorrect to say that the notion that "shareholders, regardless of size, have a voice" is a mentality of resentment towards the wealthy.
According to documents released by the Beijing Regulatory Bureau of the China Securities Regulatory Commission, it is clear that once an investor purchases shares of a listed company, they become a shareholder of that company and enjoy the basic rights of a shareholder.
The Company Law stipulates that shareholders of a company legally enjoy rights to asset income, participation in major decisions, and the selection of managers. The main rights of shareholders in listed companies include the right to information, voting rights, the right to make suggestions and inquiries, the right to profit distribution, the right to residual property distribution, the right to sue for the revocation of resolutions of the shareholders' meeting and the board of directors, the right to direct litigation, the right to request share buyback, the right to nominate independent directors, the right to propose, the right to derivative litigation, the right to request an extraordinary general meeting, the right to convene and preside over the shareholders' meeting, and the right to request the dissolution of the company, among others.
No matter how many shares you hold, as long as you are a shareholder of the company, when you do not approve of certain actions of the company, you can resolve the issue through legal means.
According to Article 189 of the Company Law: If directors and senior management personnel have the circumstances stipulated in the preceding provisions, shareholders of a limited liability company and shareholders of a joint-stock limited company who have held more than one percent of the company's shares either individually or in aggregate for more than one hundred and eighty days, may request in writing that the board of supervisors file a lawsuit with the People's Court.
Therefore, small and medium shareholders are an important part of corporate governance in listed companies. They should actively exercise their rights and firmly say no to some listed companies' major shareholders' illegal reduction of shares, financial fraud, manipulation of stock prices, and other despicable behaviors.
In conclusion, this case illustrates that the rights of capital are not unlimited. At least this time, the Chief Justice of Delaware did not side with the wealthy like Musk.