Whatever Elon wants, Tesla gets

I generally find Elon Musk helpful, as he makes it clear which things in America are really hard boundaries (contract law, perhaps copyright law) and that they are just conventions (almost everything else). You can take ketaminesmoke marijuana, ask your subordinates have your babiesIt is manage your companies like yours personal fiefdom; If you are rich and powerful enough, no one can stop you.

Musk is tied to his companies in a particularly unusual way. In Tesla’s case, he is likely responsible for its survival in a risky period following the 2008 financial crisis. His involvement and fame allowed Tesla to save significant money on advertising. For this service, Tesla shareholders voted him a huge pay package in 2018 – which was overturned by a judge in the state of Delaware, where Tesla is incorporated, because shareholders were not adequately informed that many of Tesla’s theoretically independent directors Were not that independent at all.

Maybe I should say: where Tesla it was incorporated. Because in the shareholder vote that reapproved the salary package, Tesla’s move to Texas won. Exactly as Elon Musk wanted.

I doubt I’m the only person who watches Musk closely; There are certainly those who saw him as a main signal for trading. His job cuts at Twitter were used as an excuse for other job cuts elsewhere, for example. (Musk is, in his own way, the Tiberius of Silicon Valley, ruling from afar and consumed by paranoia; who his Sejanus might be I will leave to the reader.)

His strange and sometimes scandalous behavior has been largely allowed because investing in Musk has been very profitable for many people over the last 20 years. Although Musk’s adventures in social media ownership have somewhat threatened that reputation – at least for those left with Twitter debt – yet he managed to raise $6 billion for xAI, his somewhat aimless AI company, which may or may not depend on (and compete with) Tesla itself.

Musk’s celebrity was built, first, in Hollywood – as a model for Robert Downey Jr.’s portrayal of the Marvel superhero Iron Man. But he then built a following on Twitter and at in-person events for the faithful, making himself extraordinarily available to his fans in a way that most CEOs, even famous CEOs, don’t. As time went by, he became more demanding of the high priests of your fandom – threatening cut them for linking to reports he doesn’t like, for example.

It’s clear that Musk was inspired by Steve Jobs, who was also controlling, temperamental and obsessed with advertising. But Musk’s refinements to the model led to a kind of power that even Jobs didn’t have at Apple: an empire of companies, the biggest salary package ever, and political influence. The fandom aspect here is what makes this all work – the shareholder vote in Musk’s favor was won by retail shareholders, who overwhelmingly approved his salary package.

Of course, some of these people are true believers – we heard from many of them at the shareholder meeting, thanking Musk for his contributions to society. But I don’t think all Tesla holders are purists. This is the stock market; Many people just want to make money.

Retail investment has been on the rise since the original Internet bubble in the 1990s. After the events of 2008, many people were convinced that Wall Street was nothing more than a casino, that stock prices (and company valuations ) were mostly manipulated and that there was no other way than betting on stocks to become rich enough to retire. This type of financial nihilism has resulted in meme stock trading, which Musk himself has engaged in.

Tesla is less of a meme stock than, say, GameStop or AMC but that has some similarities: Musk can move the price by posting on the company formerly known as Twitter, for example. Much of Tesla’s premium over other automakers has to do with its story: the energy company of the future, not just an automaker. This story is closely linked to Musk; While I can imagine another CEO giving Tesla his full attention, someone who can serve as an excellent operator of a car company probably won’t have the same “energy of the future” story. And actions, being about the future, are about stories. Musk’s departure could destroy Tesla’s premium.

I heard people say they thought voting in favor of Musk’s salary and relocation meant shareholders were voting against their own interests. Well, maybe. But let’s say you’ve been paying attention to corporate governance over the past few years: your WeWorks, your SEC battles with Musk, the Uber board’s blind eye on Travis Kalanick. irresponsible leadershipBoeing in general, (This is not to mention the phenomenon founder’s control.) You might be under the impression that corporate governance exists in name only.

A cynic might conclude that there is no reason to sideline Musk, or even oppose his more savage behavior, as long as he continues to make money for shareholders. Even keeping Musk’s story award might be reason enough. If Musk gets upset, he may no longer make money for shareholders – and in fact, he may compete with Tesla using his new company, xAI. Cases take a long time to go through the judicial system and have uncertain results; however, Tesla could be seriously harmed by Musk’s petulance. The shareholder vote makes sense if you believe that corporate governance is not real and that anything is possible.