WOKE WEDNESDAY: Tesla's director pay clawback, Blackrock's new oily board member, Strive strives to be less political, and investors are petrified to do their jobs voting

Live from the ISS snacks closet, it’s the ESG Industry’s ONLY weekly woke data podcast, featuring BM-man Matt Moscardi! In today’s Elbow Super Gus called July 19, 2023: the biggest ESG-ish headlines ever, an anti-woke update, and a word from our sponsor!

Our show today is being sponsored by ESGauge, your ESG data solutions provider 

Paul will be stopping by later to talk about director compensation. 

DAMION1

1. Tesla Board to Return $735 Million in Stock Awards to End Suit Over Pay Packages

1. Director Defendants: former and current Tesla directors Brad Buss, Robyn M. Denholm, Ira Ehrenpreis, Lawrence J. Ellison, Antonio J. Gracias, Stephen T. Jurvetson, Kimbal Musk, James Murdoch, Linda Johnson Rice, Kathleen Wilson-Thompson, and Hiromichi Mizuno, and CEO/director Elon Musk

1. Current Director Defendants: Robyn M. Denholm, Ira Ehrenpreis, Elon Musk, Kimbal Musk, James Murdoch, and Kathleen Wilson-Thompson.

2. The proposed payout, one of the largest in a shareholder derivative lawsuit, is meant to settle accusations by the Detroit police and fire retirement fund that the electric carmaker was too bound to its C.E.O. — and, according to the plaintiff, “grossly” overpaid its board as a result.

3. The lawsuit accused Tesla’s directors of failing to provide proper oversight. By paying its members “unfair and excessive compensation” (in both cash and options grants) from 2017 through 2020, when the suit was filed, the board deprived shareholders of significant sums of money that belonged to the company. It noted that a majority of independent Tesla shareholders rejected changes to director pay in 2014 and 2019.

4. The lawsuit also accused Musk of stacking the board with friends and family, ensuring outcomes he wanted and avoiding independent oversight. Among the defendants in the suit are Musk himself; his brother, Kimbal Musk; Robyn Denholm, Tesla’s chair since 2018; James Murdoch, a current director; and the former board members Antonio Gracias, Stephen Jurvetson and Larry Ellison.

5. In a court filing, Tesla denied wrongdoing, saying that its directors had acted in good faith but agreed to settle to end costly litigation. As part of the proposed settlement, the defendants agreed not to take any compensation for 2021, 2022 and 2023, and the company will provide investors with more detail about how it comes up with board compensation proposals.

6. 3,130,406 options

1. Director Defendants shall return the Settlement Options in the form of (i) cash (“Returned Cash”), (ii) unrestricted common shares of Tesla stock (“Returned Stock”), and/or (iii) unexercised Tesla options awarded as compensation to the Director Defendants during the Relevant Period (“Returned Options”).

7. On an annual basis, Tesla shall submit the proposed annual compensation to be paid to Non-Employee Directors to an approval vote of the majority of Unaffiliated Tesla Stockholders

8. There’s one matter the settlement won’t address: Musk’s $56 billion pay package, which is the subject of a separate lawsuit that could be decided soon.

9. Elizabeth Warren urges SEC to investigate Tesla over Twitter ties and corporate governance

2. BlackRock names Saudi Aramco CEO Amin Nasser to board

1. “His leadership experience, understanding of the global energy industry and the drivers of the shift towards a low carbon economy, as well as his knowledge of the Middle East region, will all contribute meaningfully to the BlackRock Board dialogue,” Fink added.

2. Is this the real reason why he won’t say “ESG”anymore?

3. Vivek Ramaswamy’s investment firm dials back anti-woke rhetoric

1. The investment firm founded by anti-woke crusader Vivek Ramaswamy is dialing down the very rhetoric that made it prominent, hoping to court a wider audience, the firm acknowledged to investors in a letter last month.

2. Strive Asset Management is seen “as political over investment oriented,” turning off some investors and limiting its opportunities to grow, according to the letter, viewed by Semafor.

3. Now, even as Ramaswamy is riding his culture-war views to a surprising third on the presidential campaign trail, Strive is recalibrating its own outrage meter.

4. Its new chief executive, Matt Cole, spent 16 years running bond portfolios for CalPERS, the giant California pension fund. A deeply religious Christian but not outwardly political, Cole, who took the job in May, said ESG has outlived its usefulness in investing.

5. “Don’t get me wrong. We believe that shareholders are more important than other stakeholders,” he said in an interview. “And we do think the corporate ESG movement has been value-destructive and politically motivated. It started with ‘don’t hire slave labor in China’ and now it’s become something else.”

6. But “that’s an investing [disagreement], not a culture war,” he said.

4. Biden Administration Unveils Tougher Guidelines on Mergers

1. Biden Announces New Rules To Tackle Big Corporate Consolidation

2. The guidelines — which generally provide a road map for whether regulators block or approve deals — show the Biden administration’s commitment to an aggressive antitrust agenda aimed at curtailing the power of companies like Google, Meta, Apple and Amazon.

3. New merger guidelines mark a major shift in federal antitrust enforcement, moving past the priorities established under Ronald Reagan.

4. The Federal Trade Commission and the Department of Justice’s antitrust office are set to release a draft of the new guidelines, which aim to modernize how the agencies review mergers and acquisitions with the aim of reducing market concentration and anti-competitive behavior in key corporate sectors.

5. The new guidelines, spearheaded by FTC Chair Lina Khan and Assistant Attorney General Jonathan Kanter, are part of the Biden administration’s economic policy that would dismantle a 40-year reign of laissez-faire free-market economics established under President Ronald Reagan.

6. Antitrust enforcement agencies in the Reagan administration adopted a lax review standard that encouraged mergers and acquisitions and looked favorably on monopolies for promoting market efficiency. This standard gained bipartisan acceptance and has dominated antitrust enforcement ever since.

7. The new guidelines take into account the effects that mergers would have on workers, sellers, corporate power and markets while setting new rules for mergers involving digital platforms. They will likely usher in a new era of antitrust enforcement.

5. ESG Working Group Members

1. Bill Huizenga (MI-04)

1. Christian faith “influences everything he does in his work”

2. Ann Wagner (MO-02)

1. “conservative Christian family values”

3. Barry Loudermilk (GA-11)

1. Loudermilk likened the impeachment of Trump to the crucifixion of Jesus.

4. Andrew Garbarino (NY-02)

5. Byron Donalds (FL-19)

6. Monica De La Cruz (TX-15)

7. Erin Houchin (IN-09)

8. Andy Ogles (TN-05)

1. Transcript shows self-proclaimed economist took only one community college Economics course, which he barely passed -- and did not major in International Relations, as claimed. He was also forced to take developmental-level Intermediate Algebra — essentially the high school course — where he got a "B," then he was allowed to enroll in College Algebra, where he got a "C."

2. But, in the fall of 1995, the future congressman enrolled in U.S. Presidency, Problems in Government, Political Theory and National Security Policy — and flunked every one of them. And three years later, in the fall of 1998, it happened again.

9. Bryan Steil (WI-01)

6. McDonald's workers said they faced a toxic environment of bullying and abuse. It's bad news for a business model that keeps fast food profitable.

1. A toxic culture of sexual assault, harassment, racism and bullying has been alleged by more than 100 current and recent UK staff at outlets of the fast-food chain McDonald's.

2. The BBC was told that workers, some as young as 17, are being groped and harassed almost routinely.

3. It's a PR nightmare, but McDonald's doesn't actually directly employ them.

4. The franchise model is common among fast-food companies, but it could be at risk.

5. The BBC began investigating working conditions at McDonald's in February, after the company signed a legally binding agreement with the Equality and Human Rights Commission (EHRC) in which it pledged to protect its staff from sexual harassment.

6. At the time, McDonald's insisted: "We already have a strong track record in this area."

7. McDonald's said it had "fallen short" and it "deeply apologised".

MATT1

Why your board matters

• TESLA

• The lawsuit also accused Musk of stacking the board with friends and family, ensuring outcomes he wanted and avoiding independent oversight. Among the defendants in the suit are Musk himself; his brother, Kimbal Musk; Robyn Denholm, Tesla’s chair since 2018; James Murdoch, a current director; and the former board members Antonio Gracias, Stephen Jurvetson and Larry Ellison.

• TWO THINGS ARE TRUE

• 1. Investors clearly don’t care until they sue

• 2023 Tesla vote results

• The directors were grossly overpaid!  Because the board was stacked!  EXCEPT… 

• Robyn Denholm: 26% NO (really 30%); Elon: 5% NO; JB Straubel: 14% NO (really 16%)

• Key person Risk: 6% yes

• stockholder proposal raised from the floor regarding reporting on child labor and forced labor: 0 for votes

• What the hell is a floor proposal?

• As you Sow

• 2022

• Ira Ehrenpreis: 28% NO (really 33%); Kathleen Wilson-Thompson 25% NO (really 30%)

• Class term reduced to 2 years from 3 years: not passed (did not meet 66% threshold)

• 2021

• James Murdoch: 23% NO, Kimbal Musk 15% NO (18%)

• 2020

• Denholm 13% NO

• 2. This settlement wasn’t about the pay or friends on the board, but it should have been

• The settlement occurred only after the discovery motion went against Tesla - they would have had to disclose materials they showed PwC (their auditor), and an email exchange in which a Tesla director (Jurvetson) complained he didn’t get compensation he thought he was entitled to… 

• He was the lowest paid director that was given stock options at a paltry $1.2m - I wonder if he was angry because Kathleen Wilson-Thompson made $7.3m almost entirely in options?  Or that he only had 12,000 shares to Denholm’s 206,165?  Or that Gracias had 202,000 shares?

• If investors cared, they’d use our data and vote differently

• Musk has >70% of board influence - duh, he stacks it with friends

• Kimbal Musk is on the board still.  ISS recommended him in 2023.  HE WAS RECOMMENDED AS A VOTE FOR.

• BLACKROCK

• 50% of board influence controlled by Fink, Wagner, Kapito - all BLK founder/insiders

• All the directors are otherwise optics - and WHAT ARE THE OPTICS OF “WE CARE DEEPLY FOR OIL”

• They ALREADY HAD a sitting board member who also sits on the Kuwait Petroleum Fund!  OIL! (Bader Alsaad)

• Another director is on the board of US Steel and Haliburton (Gerber)

• Our data shows more than 60% of the board is already connected in 2 degrees or less

• They all know each other!  It’s a dog and pony show otherwise!