Potential Scenario for Tesla CEO Elon Musk Losing Governance: An Analysis
Revamped Report:
Elon Musk's tenure as Tesla's CEO could face a shakeup, according to buzz rumbling in the financial world. Bloomberg captured this scoop, but Tesla hasn't exactly confirmed or denied the rumor.
Still, the wheel may be turning for change at the electric vehicle titan. On May 1, The Wall Street Journal dropped a bombshell: Tesla's board of directors has allegedly sought potential replacements for Elon Musk, who has led the company for more than 16 years. But don't expect a straightforward answer from the reclusive board; Robyn Denholm, who chairs this unconventional crew, swiftly labeled the reports as "absolutely false."
Some investors find that preposterous, though. They suspect that the decline in Tesla's deliveries could trigger a leadership reshuffle. Last year, Tesla's deliveries dipped by 1%, while the first quarter of 2025 saw a steeper 13% plunge. To make matters worse, Tesla's shares have taken a nosedive, losing a fourth of their value since the turn of the year.
So where is Elon Musk amid this storm? He's reportedly caught up in the "ministry of government efficiency" alongside President Trump. This distraction isn't exactly helping Tesla, as tensions within the board of directors are supposedly heating up. But let's face it, when has the Tesla saga ever followed a straightforward narrative?
Power Dynamics at Tesla: Board, Elon, or Both?
Given Tesla's unconventional governance structure, can Elon Musk be ousted against his will? Ann Lipton, an expert on corporate governance at Tulane University, reveals a simple majority vote would be enough to do just that. Indeed, the appointment of the CEO also falls under the board's jurisdiction. Tesla's articles of incorporation also give the nominating committee the authority to enlist headhunters, as reported by The Wall Street Journal.
But here's the catch: the board's composition is, in many ways, a reflection of Elon Musk's world. Kimbal Musk, Elon's brother, sits on the board, as does James Murdoch, son of media mogul Rupert Murdoch, and a long-time buddy of Elon’s. The board also includes Ira Ehrenpreis, a long-time Musk business partner. Robyn Denholm, who owns a chunk of her fortune from her Tesla seat, rounds off the group.
This tight-knit group seems less likely to push Elon Musk out without a fight. In fact, the board's independence was questioned by the Delaware court when it rejected Elon Musk's elaborate $50 billion compensation plan in 2022.
Passing the Torch, or Elon Musk's Exit Strategy?
A board revolt might not be necessary if Elon Musk decides to step down voluntarily. Ross Gerber, a long-time Tesla investor, speculates that Elon Musk is more interested in xAI, his AI-focused company, than in cars. If he doesn't prioritize AI now, Gerber warns, Elon Musk could find himself behind tough competitors such as Facebook, Google, Microsoft, and OpenAI.
Back in early 2024, Elon Musk hinted at this potential shift, telling investors that without controlling 25% of Tesla's voting rights, he'd rather pursue projects elsewhere.
With Tesla's annual general meeting still unconfirmed for 2025, the future of the electric vehicle champion remains uncertain. Will Elon Musk pass the torch, or will he stand his ground? Only time will tell.
© Aaron Schwartz/CNP/Bloomberg via Getty Images
By Simon Chodorge, Editor-in-Chief (automotive & industry) Published on
Notes:
- Elon Musk and Tesla's Board of Directors: The close ties between Elon Musk and the Tesla board, as well as his substantial shareholding, could make it challenging for the board to replace him without significant support from other shareholders or external pressures.
- The Delaware Ruling: In 2022, the Delaware court ruled against Elon Musk's compensation plan, questioning the board's independence and expressing concerns about the plan's potential impact on the company. This event highlights the close relationship between Musk and the board, as well as the potential challenges of implementing changes against his wishes.
- Tesla's Financial Performance: Tesla's decline in deliveries and stock price have created pressure for change within the company. If the trend continues, it could increase the likelihood of a leadership change, either through a board-led push or Elon Musk's voluntary departure.
- Artificial Intelligence (AI): Elon Musk's passion for AI and the potential competition from AI-focused companies may drive him to focus more on AI-related projects in the future, potentially opening up opportunities for a new CEO at Tesla.
- Board Member Ties: The fact that some members of the board have close personal and business ties with Elon Musk could make the idea of replacing him against his will seem less likely, as they might prioritize preserving the existing relationship over making a drastic change.
- The close ties between Elon Musk and the Tesla board, as well as his substantial shareholding, could make it challenging for the board to replace him without significant support from other shareholders or external pressures, given the influence he holds in the company's financial performance and technology-driven growth.
- Despite Elon Musk's influence, the decline in Tesla's deliveries and stock price, coupled with the tight-knit nature of the board, has created uncertainty about the electric vehicle champion's future without specific confirmation of a leadership change or Elon Musk's intention to shift focus towards artificial intelligence.
