Larry Ellison, Tesla and the Rocket-Drone Defense
(Bloomberg Opinion) -- Larry Ellison, chairman and co-founder of Oracle Corp., begins 2019 with a new and tricky job: overseeing Elon Musk, CEO of Tesla Corp. It’s tricky because Ellison says he and Musk are friends, and you know how awkward it can get if you’re matey with someone at work and then maybe something bad happens and you have to tell your buddy (and fellow board member) they screwed up.
It’s even more awkward in Ellison’s case because, judging from a riff he went on about Tesla a few months ago, it isn’t clear that even he is fully qualified to critique Musk.
This guy [Musk] is landing rockets. You know, he’s landing rockets on robot drone rafts in the ocean. And you’re saying he doesn’t know what he’s doing. Well, who else is landing rockets? You ever land a rocket on a robot drone? Who are you?”
Having the circles “lands rockets on drones” and “qualified Musk critic” overlap precisely in this particular Venn diagram of governance is pretty exacting stuff. Outside of some top aerospace engineers and maybe Jeff Bezos, it’s tough to see anyone, Ellison included, making it inside there.
Ellison was speaking metaphorically (I think). What makes this particular rocket defense interesting, though, is that it’s of a piece with standard rebuttals to anyone raising questions about Tesla or its CEO. Besides dismissing the critic as inherently unqualified, there is the “but have you driven the car?” variant (with the implication that said critic probably hasn’t and likely couldn’t build a car like that). Another is “but look at the stock price,” with the double implication that (a) markets are always and ever rational, and (b) said critic couldn’t launch a company and get a stock price like that. That last one is my personal favorite; aren’t high stock prices always simultaneously vindication for longs and a target for shorts?
In short, they all ultimately ask: Who are you? Which is fine for bros trading insults on Twitter, but not for board members.
Directors should, of course, support a successful CEO and encourage them in their endeavors. But does anyone really think a man who takes time in a TV interview to affirm his lack of respect for the SEC is in dire need of more encouragement? Ellison’s appointment is a direct result of Musk’s erratic behavior resulting in both him and the company being sued, accused of misleading investors. While fellow appointee Kathleen Wilson-Thompson, an HR specialist, would seem to address concerns raised previously by several state pension funds, the earlier appointment of existing director Robyn Denholm as chair reinforces the sense that Tesla’s supposed governance reforms after 2018’s self-inflicted crises are more like reinforcement for the CEO.
The board is ultimately there to represent shareholders, and the importance of that role only increases when you have a dominant CEO who also happens to be the largest shareholder. It isn’t rocket science.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.
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