Anokhi Manchanda
Associate Editor
Loyola University Chicago School of Law, JD 2025
Although Tesla is a power player in electric vehicles, there have recently been concerns after its $94 billion drop in market valuation at the beginning of 2024. For a company with a $750 billion valuation, that can be worrisome. However, there are bigger concerns when it comes to the person associated with Tesla: Elon Musk. Interestingly, Musk has been able to escape most of the oversight that such a large company should have.
Musk’s drug use
Members of various boards of companies have an ongoing worry that Musk’s drug use will hurt his health and the futures of the companies he oversees. The sources on his drug usage have witnessed Musk doing drugs like LSD, cocaine, ecstasy, and psychedelic mushrooms. Many have seen him do these drugs at private parties where attendees may enter after signing nondisclosure agreements. Musk has also said that he has a prescription for ketamine.
It is even more concerning that despite Musk and his attorney stating that Musk has passed all of his drug tests at SpaceX, there are reports that Elon Musk took ketamine recreationally with his brother, Kimbal, in 2021 in Miami. It has also been found that Musk did drugs with some of Tesla’s current and former board members, such as Antonio Gracias and Steve Jurvetson. This is troublesome for other board members who worry how this will affect the company and also for the public, given that it seems that the board has not done much, if anything, to reign in his unusual behavior.
The role of Tesla’s chair
The Chairman of the board of directors of Tesla Motors is Robyn Denholm, who has led the board for over five years. She was recruited by the company in 2014 and took over in 2018. She is criticized for not limiting Elon Musk’s behavior, especially since he recently demanded more control over the company. The Chair was also questioned on how independent she could be from Musk, as she has earned more than $280 million as a result of being on Tesla’s board. Denholm does not speak in public often, keeps a low profile, and stays away from discussing Musk. Although it may be easy to blame Denholm for not limiting Musk’s control, many of the board members are close to Musk. Even his own brother Kimbal is on the board.
Push by Elizabeth Warren
On July 17, 2023, Elizabeth Warren wrote a letter, calling on the U.S. Securities and Exchange Commission to investigate the Tesla Board of Directors and Elon Musk for many issues, including possible conflicts of interest after Musk purchased Twitter (despite still being Tesla’s CEO as Tesla advertised on Twitter). She continued by saying that the Board should enforce the rights of Tesla’s investors and they should be informed of potential issues. Senator Warren also asked the Tesla Board if they were addressing corporate governance concerns and complying with SEC rules and regulations since Musk assumed his new role at Twitter. She goes on to say that the Tesla Board has not taken any obvious action regarding these issues. Her concerns have been renewed with a Delaware judge’s decision on Musk’s compensation package.
The present and future
The aforementioned case was decided in January of 2024. The Delaware court in question ruled that Tesla cannot compensate Musk $55.8 billion based on the pay package agreed upon in 2018. Many experts foresee Musk appealing the decision to the Delaware State Supreme Court.
Going forward, I agree with Senator Warren’s push for more oversight and accountability. I know that the SEC has not been sitting idle, but it seems as though they could be doing more to change the Tesla board to make it more independent from Musk so they can regulate him (though I know that is much easier said than done). The Delaware court’s decision seemed to be going in the right direction, but I know that Musk has infinite legal resources to appeal the decision and apply pressure to the court. These resources in addition with his childlike demeanor that makes him want to win always could be a lethal combination. In any case, going forward, his reach needs to be limited for the sake of his companies and because it sets an awful precedent for unacceptable CEO behavior for the future.