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Musk testifies he will ‘reduce’ time at Twitter and eventually hand over reins

Source image: https://www.theguardian.com/technology/2022/nov/16/musk-twitter-reduce-time-handover

Elon Musk told a court on Wednesday that he expects to reduce his time at Twitter and eventually find someone else to run the social media company.

“There’s an initial burst of activity needed post-acquisition to reorganize the company,” Musk said in his testimony. “But then I expect to reduce my time at Twitter.”

Musk made the remarks while testifying in a Delaware court to defend a $56bn pay package Tesla awarded him in 2018 that helped make him the world’s richest man.

Tesla shareholder and heavy metal drummer Richard Tornetta has sued Musk and the board claiming Musk used his dominance over Tesla’s board to dictate terms of the package, which did not require him to work at Tesla full-time and came as he was running several other companies.

Musk said the electric car maker was in “crisis” in 2017 and he gave it his full attention. “I was entirely focused on the execution of the company,” Musk said.

Musk’s testimony before chancellor Kathaleen McCormick comes as he is struggling to oversee a chaotic overhaul of Twitter, the social media platform he was forced to buy for $44bn in a separate legal battle before the same judge after trying to back out of that deal.

Earlier this month Musk announced he was cutting half of Twitter’s staff after a “massive” drop in revenue. He told the remaining staff they have until Thursday to decide whether they will leave or confirm they will work “long hours at high intensity” as part of “the new Twitter”.

Musk described how the automaker was struggling to survive in 2017, when the pay package was developed.

He also said he not would accept a pay plan that required him to punch a clock or commit certain hours to Tesla. “I pretty much work all the time,” he said. “I don’t know what a punch clock would achieve.”

Investors are growing concerned about Musk’s focus on Twitter. On the stand, the billionaire said he focuses his attention where it is needed most.

“So in times of crisis, allocation changes to where the crisis is,” said Musk, who wore a dark suit and tie. He had arrived in a black Tesla and was led into the courtroom via a separate entrance due to safety concerns.

Musk has a history of combative testimony and often appears disdainful of lawyers who ask probing questions. He has called opposing attorneys “reprehensible”, questioned their happiness and accused them of “extortion”.

Musk appeared more restrained in Wednesday’s proceedings, although he chafed at the probing questions.

At one point, Musk told the plaintiff’s lawyer, “your question is a complex question that is commonly used to mislead people”.

He acknowledged he wasn’t a lawyer but added “when you’re in enough lawsuits you pick up a few things”.

Musk tweeted this week that he was remaining at Twitter’s San Francisco headquarters around the clock until he fixed that company’s problems and said on Wednesday he had come on an overnight flight from the social media company.

Tornetta has asked the court to rescind the 2018 package, which his attorney Greg Varallo said was $20bn larger than the annual gross domestic product of the state of Delaware.

The legal team for Musk and the Tesla directors have cast the pay package as a set of audacious goals that worked by driving 10-fold growth in Tesla’s stock value, to more than $600bn from around $50bn.

They have argued the plan was developed by independent board members, advised by outside professionals and with input from large shareholders.

The disputed Tesla package allows Musk to buy 1% of Tesla’s stock at a deep discount each time escalating performance and financial targets are met. Otherwise, Musk gets nothing.

Tesla has hit 11 of the 12 targets, according to court papers.

Shareholders generally cannot challenge executive compensation because courts typically defer to the judgment of directors. The Musk case survived a motion to dismiss because it was determined he might be considered a controlling shareholder, which means stricter rules apply.

“There is no case in which a 21.9% shareholder who is also the chief executive has received a structured payout plan of this magnitude,” Lawrence Cunningham, a corporate law professor at George Washington University, said of the lack of precedent.

McCormick is not expected to rule on the case for months.

Reuters contributed to this story

Source: https://www.theguardian.com/technology/2022/nov/16/musk-twitter-reduce-time-handover

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Fed announces smallest interest hike in a year as inflation ‘eases somewhat’

The US Federal Reserve signaled a slowdown in its fight against soaring inflation on Wednesday, announcing its smallest hike in interest rates in almost a year.

After its latest meeting, the Fed announced a quarter-point increase in its benchmark interest rate to a range of 4.5% to 4.75%, the smallest increase since March last year. “Inflation has eased somewhat but remains elevated,” the Fed said in a statement adding that “ongoing increases” will be appropriate as it seeks to bring prices down.

“We covered a lot of ground, and the full effects of our rapid tightening so far are yet to be felt. Even so, we have more work to do,” said Fed chair Jerome Powell.

Inflation in the US has been running at levels unseen since the 1980s, triggering a cost of living crisis as the price of everything from eggs to gas and rent has shot up.

In order to tamp down inflation the Fed has aggressively hiked rates as it seeks to cool the economy and bring prices back under control.

A year ago the Fed rate – which affects the interest rates on everything from business and personal loans to mortgages and credit card rates – was close to zero. After the most rapid series of rises since the 1980s, it is now at a level last seen in 2007.

There are signs that prices are coming down. In December, the annual rate of inflation fell to 6.5% from 7.1% in the previous month, the sixth straight month of yearly declines and well below the peak of 9.1% it hit in June, its highest rate since 1982.

Consumer spending – the largest driver of the economy – fell 0.2% from November to December. The housing market has slowed and many of the major tech companies have announced large job cuts as they have moved to rein in spending.

But inflation remains well above the Fed’s annual target rate of 2% and the central bank has said it will keep rates high until price stability is achieved. The Fed also continues to worry about the jobs market. The unemployment rate was 3.5% in December, a 50-year low and on Wednesday the labor department announced there were 11m job openings in the US in December – almost two available jobs for every person looking for one and an increase from November.

The tight labor market has driven up wages and Powell, has made clear that the central bank believes rising wages threaten to spur on inflation – a so-called wage-price spiral. “You don’t see that yet, but the whole point is, once you see it, you have a serious problem. That means that effectively in people’s decision-making, inflation has become a real salient issue,” said Powell. “That is what we can’t allow to happen.”

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Bank of England raises UK interest rates to 4%

The Bank of England has blamed the inflationary impact of higher than expected wage rises for an increase in interest rates from 3.5% to 4%, piling more pressure on mortgage payers and businesses struggling to pay off their loans.

Amid calls from unions for higher wages to protect against the worst falls in living standards for 100 years, a majority of the Bank’s monetary policy committee (MPC) said the 0.5 percentage point rise was needed after a jump in private sector wages above the central bank’s previous forecasts.

Marking its 10th consecutive rate increase, the Bank said the economy would enter a shorter and shallower recession than it predicted last year – with output falling by 1% from peak to trough compared with a 3% drop it said in November.

Bank staff now expected GDP to have grown by 0.1% in the final quarter of 2022, stronger than predicted in November. That would mean the UK did not enter a technical recession in 2022, as previously thought after the economy shank by 0.3% in the third quarter.

The UK economy is forecast to shrink in each quarter of 2023 and the first quarter of 2024 before staging a modest recovery.

The Bank said the hit to trade from Britain was being felt sooner than previously expected. “The effects of Brexit on trade are now estimated to be emerging more quickly than previously assumed, and that lowers productivity somewhat,” it said.

The 0.5-point increase was forecast by City analysts, who expect the Bank to raise interest rates again to 4.5% in the spring before a series of cuts next year brings Bank rate back to 3.5%.

More than 1.5 million mortgage payers are expected to suffer an average £3,000-a-year increase in interest payments when they refinance their loans this year as well as the hundreds of thousands of households that refinanced at higher rates in 2022.

Monthly bills for households in the rental sector have rocketed, with landlords blaming higher borrowing costs for the rises.

Two members of the nine-member MPC voted to keep rates at 3.5%, arguing that the effects of previous rates rises had yet to feed through into the wider economy.

Silvana Tenreyro and Swati Dhingra, both seconded from the London School of Economics to the MPC, have repeatedly warned that the central bank underestimates the impact of previous interest rate rises and should pause to judge the effects on mortgage holders, renters and small businesses before taking further action.

The MPC’s majority view was that it would “continue to monitor closely indications of persistent inflationary pressures, including the tightness of labour market conditions and the behaviour of wage growth and services inflation”.

In a warning to workers, it said if there was evidence of “more persistent pressures, then further tightening in monetary policy would be required”.

The Bank expects the headline rate of inflation to fall rapidly this year from December’s 10.5% to 3.5% by the end of the year, and then 1% in 2024. The Bank has an inflation target of 2%.

The MPC said GDP would only reach its previous peak in 2019 by 2026, indicating that a combination of staff shortages fuelled by the Covid-19 pandemic and Brexit combined with high energy prices had reduced the economy’s capacity to grow.

After the turmoil in financial markets that followed Liz Truss’s mini-budget, investors forecast interest rates peaking at 5.25%, but the highest they expected before today’s meeting was 4.5%.

Private sector wages increased by 7.2% in the three months to November, according to official figures that show the highest rises going to workers in the financial services sector and business services such as accountancy and the legal industry. Most negotiated wage rises are about 4%, according to industry surveys.

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Shell’s actual spending on renewables is fraction of what it claims, group alleges

Shell has misleadingly overstated how much it is spending on renewable energy and should be investigated and potentially fined by the US financial regulator, according to a non-profit group which has lodged a complaint against the oil giant.

The US Securities and Exchange Commission (SEC) has been urged to act over Shell’s most recent annual report in which it stated 12% of its capital expenditure was funneled into a division called Renewables and Energy Solutions in 2021. The division’s webpage, which is adorned with pictures of wind turbines and solar panels, says it is working to invest in “wind, solar, electric vehicle charging, hydrogen, and more”.

However, Global Witness, the activist group that has lodged the new complaint with the SEC, argues that just 1.5% of Shell’s capital expenditure has been used to develop genuine renewables, such as wind and solar, with much of the rest of the division’s resources devoted to gas, which is a fossil fuel.

“What Shell has said about the energy transition is not reflected in what they are doing,” said Zorka Milin, senior adviser at Global Witness. “This business unit is fundamentally mislabeled, it has very little in the way of renewables and investors could be lulled into thinking Shell is doing far more on renewables than it is.

“This is greenwashing. Gas, whatever it may be, is not renewable, it’s part of the problem. I hope the SEC opens an investigation and imposes appropriate penalties to stop this greenwashing.”

Shell does not have a full breakdown of its renewable energy activity in its annual reports but Global Witness said that by examining the document they could find $288m in wind and solar investment in 2021, which is equivalent to 1.5% of Shell’s capital expenditure. Much of the spending by the Renewables and Energy Solutions division appears to be on the trading and marketing of gas.

Should the SEC act over the issue, it will mark the most aggressive regulatory foray yet by the US federal government against a fossil fuel sector that is facing multiple lawsuits in several states for misleading investors and the public over what they knew about the climate crisis.

Shell, which is headquartered in London but is listed on the New York stock exchange, has denied misleading investors. “We’re confident Shell’s financial disclosures are fully compliant with all SEC and other reporting requirements,” said a company spokeswoman.

The Shell spokeswoman said the company budgeted $20bn for “energy transition activities” in 2022, which is a third of its total operational and capital expenditure spending. This investment went towards renewable energy, hydrogen fuels, capturing carbon at the source of pollution and research and development, she said.

Most of the world’s largest oil companies now accept that burning their product is causing global heating and have committed to the goals of the Paris climate agreement. But their shift away from fossil fuels has been ponderous – only about 5% of oil and gas company capital expenditure went to wind, solar and other renewables in 2022, according to the International Energy Agency. This was up from just 1% in 2019.

Last year was a particularly lucrative one for oil companies’ traditional business model, with soaring fossil fuel costs in the wake of Russia’s invasion of Ukraine prompting record profits for some of the wealthiest businesses in the world. Exxon made a record annual profit of nearly $56bn last year, while Chevron has reported a $36.5bn profit for 2022.

Milin said she hoped the SEC, which is separately mulling new requirements for companies to disclose their greenhouse gases, would act to deter other oil companies. “No more will we allow big polluters to pull the wool over our eyes while the world burns,” she said. The SEC did not respond to a request for comment.

Bruce Huber, an expert in environmental law at Notre Dame University, said the new complaint highlights the external pressure that environmentalists are now placing upon fossil fuel companies.

“What we’re seeing now is climate activists poring over the disclosures of energy firms with a fine-tooth comb, looking for any misstatements that could be the basis for liability or penalty,” he said.

“Whether these tactics will actually induce Shell or its competitors to decarbonize is unclear, but even if not, those firms won’t be able to sneeze without someone looking for a securities violation.”

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