Elon Musk’s reported drug use has Tesla Inc. board members going through a well-recognized quandary: having to resolve what, if something, to do concerning the chief govt subjecting administrators and shareholders alike to nice monetary and authorized threat.
The Wall Road Journal’s article describing Musk’s historical past of leisure drug use and ongoing consumption of ketamine is the most recent in an extended line of assessments for a board filled with the CEO’s acolytes — a number of of whom agreed lower than six months in the past to return $735 million to settle a lawsuit alleging that they had excessively compensated themselves.
Shareholders voiced dissatisfaction with the board final yr over Tesla’s succession planning, and accused Musk of being distractedby his commitments to different corporations. His chaotic 2022 takeover of Twitter Inc., the social media firm he’s renamed X Corp., contributed to Tesla shedding $672 billion in market capitalization that yr.
Earlier than that, administrators rode out litigation associated to Musk’s doomed effort to take Tesla personal in 2018, and his calling a cave explorer concerned within the rescue of a youth soccer group in Thailand that yr a pedophile. Additionally they testified in proceedings associated to the $55 billion compensation package deal they organized for Musk in 2018, and in a trial difficult Tesla’s $2.6 billion acquisition of SolarCity, the struggling energy supplier run by Musk’s cousins.
The report by the Journal — which mentioned Musk has used LSD, cocaine, ecstasy and psychedelic mushrooms, usually at personal events — isn’t even the Tesla board’s first brush with drug-related points. Weeks after the New York Occasions reported in August 2018 that administrators had expressed concern about Musk’s use of Ambien, he puffed a bluntcontaining marijuana on comic Joe Rogan’s podcast.
Tesla’s board took minimal motion within the wake of these episodes. It changed Musk as chairman and named two new unbiased administrators as required by the settlement of fraud costs introduced by the US Securities and Trade Fee. It might face extra litigation over its dealing with of Musk’s drug use, mentioned Stephen Diamond, who teaches programs on company governance at Santa Clara College’s College of Regulation.
“This may give ammunition to class-action legal professionals on behalf of disgruntled shareholders at Tesla, if they’ll tie proof of drug use to his precise position as an govt,” Diamond mentioned. “The Tesla board has an obligation to discern what’s occurring right here.”
Whereas Musk’s drug use has the potential to hurt his different enterprises — significantly Area Exploration Applied sciences Corp., a US authorities contractor — he derives extra of his fortune from Tesla than another firm. His shares and exercisable inventory choices are value $97.6 billion, or about 44% of his $219.4 billion web value, based on the Bloomberg Billionaires Index.
“No matter I’m doing, I ought to clearly hold doing it!” Musk posted on X, citing Tesla and SpaceX being the world’s most dear automobile and house corporations. “If medication really helped enhance my web productiveness over time, I might undoubtedly take them!”
Tesla’s longest-serving administrators are Musk, 52, and his youthful brother, Kimbal — each have been on the board since 2004. Kimbal’s reelection to the board has gotten pushback lately from an investor crucial of his lack of related business expertise and a proxy adviser involved about objectivity.
Proxy advisers additionally opposed the 2022 reelection of Ira Ehrenpreis, a enterprise capitalist who has been on the board since 2007. They cited concern concerning the quantity of borrowing in opposition to Tesla inventory by Musk and different administrators, and a half measure the board took in response a shareholder proposal for annual director elections that bought majority assist in 2021.
The one different comparatively long-tenured director on the board is Robyn Denholm, who joined in 2014 and have become chair in 2018. Months after her elevation to the place, which was linked to the SEC suing Musk and Tesla over his take-private tweeting, she praised Musk’s use of the social media platform.
“Twitter is a part of on a regular basis enterprise for a lot of executives in the present day,” Denholm mentioned in a March 2019 interview. “From my perspective, he makes use of it properly.”
Tesla’s 4 different administrators are James Murdoch, the previous twenty first Century Fox CEO appointed in 2017; Kathleen Wilson-Thompson, the previous human-resources chief of Walgreens Boots Alliance Inc. who joined in 2018; and Joe Gebbia and JB Straubel, who have been elected to the board final yr. Gebbia co-founded Airbnb Inc., and Straubel is a co-founder of Tesla.
Musk has shut relationships with Murdoch, Gebbia and Straubel. Throughout testimony in Delaware Chancery Court docket over his Tesla compensation package deal in 2022, the CEO fielded questions from a plaintiff’s lawyer about vacationing with Murdoch on a number of events.
After Musk tweeted about making an attempt to take Tesla personal, Gebbia texted his reward, calling it a “baller transfer.” Musk and Straubel’s ties date again to Tesla’s founding in 2003.
