Even Elon Musk Seems to Be Pleading for Tesla’s Board to Act

(Bloomberg Opinion) -- Among the many disturbing parts of the New York Times interview with embattled Tesla Inc. CEO Elon Musk, this line got my attention: “Some board members have expressed concern not only about Mr. Musk’s workload but also about his use of Ambien, two people familiar with the board said.”

If Tesla directors are worried about Musk — and they should be, based on this unhinged interview — then here is advice for them: Do your jobs.

Corporate directors are the ultimate bosses of a company. They are empowered by the stockholders who own it to exercise oversight over all aspects of operations, including management. If Tesla directors are concerned that Musk is spreading himself too thin or endangering his health, then they have both the power and responsibility to do something other than whispering to journalists. They can force Musk to step down, take a leave of absence, or delegate some responsibilities to other executives. Tesla directors cannot and should not simply wring their hands about Musk and do nothing. 

Read that interview with Musk, and then read it again. This sounds like a man almost begging for someone to save him from himself.

Even Elon Musk Seems to Be Pleading for Tesla’s Board to Act

Remember that Musk also runs the rocket company SpaceX and the tunnel digging firm Boring Co., and has other pet projects. He doesn’t need to have his hand in multiple companies. Musk also doesn’t need to sleep in the Tesla factory after setting unrealistic short-term production targets. He doesn’t need to swat down everyone with an opinion on Twitter. He doesn’t need to go on quests to create (an apparently unwanted) rescue submarine. Musk doesn’t need to spend his time coming up with flamethrowers. He doesn’t need to spark a scandal and a regulatory investigation by airing a half-baked attempt to take Tesla private.

All these stresses on Musk and the damages to the viability and value of Tesla are self-inflicted by the man in the corner office. But Tesla’s directors should share in the blame. Where have they been?

The closest the public has seen to action from Tesla’s directors is an after-the-fact scramble to show that, yes, Musk had discussed with them his interest in taking Tesla private and they are going through the motions to put a facade of normalcy on an utterly not-normal last 10 days for the company. And then Tesla’s lead independent director told the Times that he contacted Musk to discuss his infamous tweet — this was after Musk told the newspaper that he didn’t recall getting any communications from the board about that same infamous tweet. Tesla directors’ exercise of their responsibility to the company has amounted to covering their butts. 

Tesla’s board has shown before it cannot or will not force changes at the company. Musk has previously made a “joke” about posting provocative Twitter messages after taking the sleeping medication Ambien and drinking wine. There was no whisper of action from the board. Ditto when Musk lashed out at Wall Street and investors betting against Tesla stock while the company struggled to fix production problems. Tesla directors also approved the decision to buy struggling sister company SolarCity Corp. in what seemed like a thinly disguised bailout of a company owned in part by Musk, run by his cousin, and owing money to both as well as to SpaceX

Even Elon Musk Seems to Be Pleading for Tesla’s Board to Act
As my colleague Liam Denning has repeatedly chronicled, Tesla is so closely intertwined with Musk that it puts everyone involved in the company in a bind. Belief in Musk has been the primary reason for Tesla’s rich market valuation and support from stock and debt holders despite years of cash burn and missed production targets that have attracted the attention of securities regulators.

The faith in Musk and faith in his company are so correlated that any attempt to put guardrails on Musk appears to put Tesla’s valuation at risk. And the company’s valuation is the foundation of Tesla’s ability to secure the cash it needs to stay in business and fulfill Musk’s ambitions. Musk is both the reason for Tesla’s success and the source of its possible failure. That puts Tesla’s board in a tough spot, and I don’t envy it. 

That’s the trouble with highly paid second jobs as a corporate director. Sometimes those jobs require tough decisions. Even Musk himself is talking like he wants the board to rein him in. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Shira Ovide is a Bloomberg Opinion columnist covering technology. She previously was a reporter for the Wall Street Journal.

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