The man in charge of Tesla ( TSLA ) wants more control over the company — and CEO Elon Musk is putting public pressure on the company’s board of directors to take over.
Musk warned earlier this week that in order for him to guide the all-electric carmaker into becoming a global leader in artificial intelligence and robotics, he would need greater influence over the company’s decisions.
“He has bargaining power in the sense that there is only one Elon Musk,” said David Cass, a finance professor at the University of Maryland. “It feels like a negotiation.”
In a post on X“I don’t feel comfortable growing Tesla into a leader in AI and robotics without having 25% voting control,” Musk said, the social platform he owns. “It’s enough to be influential, but not so much that it can’t turn on me.” . Otherwise, he said, “I’d rather build products outside of Tesla.”
Musk once owned more than 20% of Tesla shares, but sold a significant portion of it to help finance his purchase of what was then known as Twitter. He currently owns approximately 13% of the shares as the largest shareholder in the automaker.
to threaten? Negotiation? both of them? It doesn’t matter. At the very least, Musk’s latest statements have highlighted ongoing governance issues at Tesla and the unique influence he has over the company.
Tesla did not respond to requests for comment.
His latest demands, coupled with a recent Wall Street Journal report that exposed some insiders’ concerns about his alleged drug use, raise more questions about whether the board is too comfortable with the company’s unruly CEO. Musk criticized the newspaper’s report and said that he did not fail the recent random drug tests, without explicitly denying the details of the article.
“Whatever I do, obviously I have to keep doing it,” he posted on X last week, bragging about his business successes.
50 billion reasons to care
Musk’s public complaints about control and compensation are noteworthy given the enormity of the CEO’s current performance package, which has elevated him to the rare status of the world’s richest person. Musk’s pay package is set to launch in 2018, and has the potential to add up to more than $50 billion.
The contingent gains were so large that a shareholder lawsuit that same year claimed that the plan constituted corporate waste and unjust enrichment, and that the directors had violated their fiduciary duties by approving the plan. The trial was held in November 2022, and post-trial briefings and arguments were completed, according to Tesla’s filings with the Securities and Exchange Commission.
“Tesla’s board of directors is great. The reason there’s no new ‘compensation plan’ is because we’re still waiting for a decision in my compensation case in Delaware,” Musk said on X.
His push for greater control is important because Tesla’s board has long drawn criticism for not acting as a check on the reckless CEO.
“I’ve never seen a situation like this before, but my first reaction is that the CEO’s desire for more control of the company would not be a reasonable justification for granting large shares to many investors,” said Brianna Castro, a senior director at the company. US research at Glass Lewis, a shareholder advisory firm.
Musk’s series of outbursts, hasty decision-making, and inflammatory public statements have led even loyal investors to criticize the board for not holding Musk accountable.
“It’s time for the Tesla board to wake up and do its job,” a prominent Tesla bull said in late 2022, at the height of the Twitter takeover drama. Other market watchers over the years have called for the board to appoint a more balanced operator to help Musk run the company.
“The council is his council”
Critics have also focused on the composition of the council itself. They say some members are too closely tied to Musk to exercise strong oversight as company directors.
“He has a lot of power, plus the board is his board,” said William Klepper, chief academic officer and associate professor at Columbia Business School. “I don’t see them having the strength of good governance to stand up to Elon’s request,” he said.
A closer look at the board members and their ties to Musk supports Klepper’s point.
Many board members have personal relationships with the executive branch. This would affect their judgment when deciding matters that could pit shareholders’ interests against those of an individual Musk.
That the board is made up of many of Musk’s allies also challenges the idea that the organization acts as an independent overseer of executive power, rather than as an advisory committee, or worse, as enablers with siblings, friends and business allies among the group.
Here’s a look at who sits on the company’s board:
Robin Denholm, Chairman of the Board
Robin Denholm became chairman of the board after a 2018 settlement with the Securities and Exchange Commission, which forced Tesla to replace Musk as chairman after an infamous tweet that he had secured funding to take Twitter private.
But Denholm had been director since 2014. At the time of the leadership change, some experts questioned how Denholm would be able to respond to Musk if she had been present during the run-up to the controversy. Prior to joining the Board, Denholm held executive positions at Australian telecommunications company Telstra. She also gained experience in the automotive industry after working as a senior financial manager at Toyota in Australia for seven years.
James Murdoch
James Murdoch, a friend of Musk’s, joined the board in 2017. James Murdoch, the son of Rupert Murdoch, the media scion who served as CEO of Twenty-First Century Fox from 2015 to 2019, said he met Musk in the 1990s and then they reconnected. later. After he bought one of the first Tesla cars in Europe. Murdoch traveled with Musk’s family and said he attended Kimbal Musk’s party Wedding. He has also personally invested in SpaceX.
Kimball Musk
Kimbal Musk is Elon’s brother, who co-founded Zip2, a software startup that helped launch its rise to prominence in the world of technology entrepreneurship. Musk also served as a director of SpaceX from its founding in 2002 until January 2022, when he took on a leadership role at one of Elon’s other interconnected companies.
Ira Ehrenpreis
Ira Ehrenpreis is a prominent venture capitalist and the founder and managing partner of DBL Partners. Ehrenpreis is a longtime friend of Musk and helped design the 2018 compensation package that remains in legal dispute.
J.B. Straubel
Before joining the board, J.B. Straubel co-founded Tesla and served as its chief technology officer from 2005 to 2019. He is credited with inventing or helping to create many of the company’s signature technologies, including those related to electric vehicle batteries and engineering. Architecture and architecture. Energy management. Straubel left Tesla in 2019 to focus on his startup Redwood Materials, which recycles lithium-ion batteries and aims to create a supply chain for electric vehicles and clean energy products. He previously served on the board of SolarCity until it was acquired by Tesla in 2016.
Joe Gebbia
Joe Gebbia, co-founder of Airbnb, joined Tesla’s board of directors in 2022. Unlike Musk, Gebbia is among a group of tech industry visionaries who recently stepped down from leadership roles after their companies achieved great success, choosing to pursue ventures. Others like The market environment has cooled after the days of startup mania. His appointment adds another clear Musk ally to the board. When Musk tried to take Tesla private, Gebbia sent him a text message saying “move baller” in August 2018, according to records disclosed in a shareholder lawsuit. “It’s bad enough to be a private company with no alternative to an IPO,” he said, seeming to sympathize with Musk’s predicament.
Kathleen Wilson Thompson
Kathleen Wilson Thompson joined the Board of Directors in 2018. She was a senior human resources executive at Walgreens, where she helped develop an internal training and career development center. Prior to her time at Walgreens, she worked for nearly two decades at Kellogg’s, where she held leadership positions in legal and operational roles. She was the third woman to join Tesla’s board of directors.
What’s next for the council?
If Delaware’s compensation case against Tesla and Musk is decided, it could force the board to reduce Musk’s compensation and provide directors with legal cover to check his latest claims, Columbia Business School’s Klepper said.
But in the meantime, Musk’s comments have remained unchallenged, leaving some observers with the impression that the board will continue to abide by Musk’s whims.
Musk also said he would accept a dual-class share structure, which would give him greater voting power and achieve his desired 25% control of the company. but He said in another post on X This arrangement is not workable.
Some outside experts and investors have criticized multi-tiered voting structures, which can enhance the power of founders and other early investors, as is the case with Meta (META) CEO Mark Zuckerberg, who controls the company through top-voting shares. Shareholder managers who own a majority of voting shares face weaker institutional controls over decision-making.
“We believe that each shareholder’s economic stake should be proportional to their voting power,” Glass Lewis’s Castro said.
Next year, the board will have to overcome these ongoing tensions and confront Musk’s latest demands for more control.
This could come through hiring new managers who are not already part of Musk’s circle. But a lot will depend on Tesla’s stock price in the coming quarters.
Happy shareholders tend not to talk about abstract ideas like corporate governance when their portfolios grow. But if Tesla’s stock price falls, even loyal supporters could lose patience.
Perhaps the biggest challenge facing the board of directors is to prove its independence from the man who is fundamental to the company’s value.
Hamza Shaaban is a reporter for Yahoo Finance covering markets and economics. Follow Hamza on Twitter @hshaban.
Click here for the latest stock market news and in-depth analysis, including stock-moving events
Read the latest financial and business news from Yahoo Finance