The man in charge of Tesla (TSLA) wants even more control of the company — and CEO Elon Musk is putting public pressure on the company’s board of directors to acquire it.
Musk warned earlier this week that for him to steer the all-electric carmaker to become a global leader in artificial intelligence and robotics, he’d need even greater sway over the company’s decisions.
“He does have bargaining power in the sense that there is only one Elon Musk,” said David Kass, a professor of finance at the University of Maryland. “It looks like a negotiation.”
In a post on X, the social platform he owns, Musk said, “I am uncomfortable growing Tesla to be a leader in AI & robotics without having 25% voting control. Enough to be influential, but not so much that I can’t be overturned.” Otherwise, he said, “I would prefer to build products outside of Tesla.”
Musk once held more than 20% of Tesla shares but sold a significant chunk to help finance his purchase of what was then Twitter. He currently holds a nearly 13% stake as the carmaker’s largest shareholder.
A threat? A negotiation? Both? No matter. Musk’s latest salvo has, at the least, placed a harsh spotlight on ongoing governance issues at Tesla and the singular influence he holds over the company.
Tesla did not respond to requests for comment.
His latest demands, along with a recent Wall Street Journal report revealing some insiders’ concerns about his alleged illicit drug use, raise further questions about whether the board is too cozy with the company’s headstrong executive. Musk criticized the Journal’s report and said he had not failed recent random drug tests, without explicitly denying the details of the article.
“Whatever I’m doing, I should obviously keep doing it,” he posted on X last week, boasting of his business successes.
50 billion reasons to care
Musk’s public complaints about control and compensation are notable due to the magnitude of his current CEO performance package, which has elevated him to the rarified status of the world’s richest person. Set in 2018, Musk’s pay package has the potential to add up to more than $50 billion.
The conditional gains were so large that a shareholder lawsuit filed the same year alleged the plan constituted corporate waste and unjust enrichment, and that board members breached their fiduciary duties by approving the plan. The trial was held in November 2022, and post-trial briefings and arguments are complete, according to Tesla’s SEC filings.
Musk said on X that “the Tesla board is great. The reason for no new ‘compensation plan’ is that we are still waiting for a decision in my Delaware compensation case.”
His push for greater control is significant because Tesla’s board has long drawn criticism for not serving as a check on the notoriously impulsive executive.
“I haven’t seen a situation like this before, but my first reaction is that a CEO wanting more control over a company would not be a reasonable justification for a large grant of shares for many investors,” said Brianna Castro, senior director of US research at Glass Lewis, a shareholder advisory firm.
Musk’s litany of outbursts, rash decision making, and inflammatory public remarks have prompted even loyal investors to criticize the board for not holding Musk accountable.
“It’s time for Tesla’s board to wake up and do their job,” one prominent Tesla bull said in late 2022, at the height of the Twitter takeover drama. Other market observers over the years have called on the board to install a more even-keeled operator to help Musk run the company.
‘The board is his board’
Critics have also focused on the board’s makeup itself. Some members, they say, are too closely tied to Musk to exercise robust oversight as company directors.
“He’s got a lot of power, plus the board is his board,” said William Klepper, academic director and adjunct 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 close look at the board members and their connections to Musk supports Klepper’s point.
Several board members have personal ties to the executive. That has the potential to cloud their judgment when deciding on matters that could pit the interests of shareholders against those of Musk, the individual.
That the board is comprised of several Musk allies also challenges the notion that the institution serves as an independent overseer of the executive, rather than as an advisory committee, or worse, as enablers with a…
Read More: The spotlight has turned on its directors as Elon Musk asks for more control.