The CEO of Tesla, Elon Musk, has made it known that he wants greater control of the company, stating that he would need a 25% voting control if he were to drive the all-electric carmaker to become a global leader in artificial intelligence and robotics. Musk’s desire for increased control has placed significant pressure on the company’s board of directors, prompting speculation that it could be the subject of negotiation or a possible threat.
The reasons for Musk’s demand for greater control could be tied to his aspiration to lead Tesla to the forefront of AI and robotics technology. Musk, who currently holds a nearly 13% stake in the company, previously held more than 20% of Tesla shares before selling a significant chunk to finance his purchase of what was then Twitter. His significant stake as the carmaker’s largest shareholder grants him bargaining power over the board.
Additionally, Musk’s recent demands are notable given the size of his current CEO performance package, which has the potential to add up to more than $50 billion. The litigation of a shareholder lawsuit filed against the pay package demonstrates concerns about whether Tesla’s board exercises adequate oversight over the company’s headstrong executive.
Some investors and market observers have criticized the board for not serving as a check on Musk’s impulsive behavior and have called on them to appoint a more balanced operator to complement Musk’s leadership. Critics question the board’s independence due to several members’ personal ties to Musk, which could potentially influence their judgment.
The composition of the board itself has raised scrutiny, with several members being connected to Musk personally. Some board members, including individuals such as James Murdoch, a friend of Musk, and Musk’s brother, Kimbal Musk, raise concerns about the board’s ability to act independently to advance shareholder interests.
Moving forward, the Delaware compensation case could potentially force the board to scale back Musk’s compensation and provide legal cover for them to assess and check Musk’s demands for increased control. As the drama unfolds, the board faces a crucial test of its independence, its capacity to provide effective oversight, and its commitment to safeguarding shareholder interests.
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