The revelation of Elon Musk’s history of drug use, highlighted in The Wall Street Journal, has yet again thrown Tesla’s board into a maelstrom of uncertainty. The board, primarily composed of Musk’s close allies, now grapples with the dilemma of addressing the financial and legal risks imposed on both shareholders and the company due to Musk’s reported recreational drug use, including the ongoing consumption of ketamine.
A Troubled Past for Tesla's Board
This isn’t the first time Tesla’s board has faced challenges tied to Musk’s actions. Shareholder dissatisfaction arose over Tesla’s succession planning, and allegations surfaced that Musk’s commitments to other companies diverted his focus, leading to a chaotic takeover of Twitter Inc. rebranded as X Corp. in 2022, causing a massive loss in market capitalization for Tesla.
Image Source: news18.com
The board weathered storms from litigation linked to Musk’s failed attempt to take Tesla private in 2018, his controversial remarks about a cave explorer, and legal battles regarding hefty compensations and acquisitions, notably the $55 billion package for Musk and the $2.6 billion SolarCity acquisition.
Legal Ramifications and Financial Implications
The latest report alleging Musk’s use of LSD, cocaine, ecstasy, and psychedelic mushrooms, coupled with previous incidents like smoking marijuana on a podcast, poses legal threats to Tesla. Experts suggest that tying evidence of drug use to Musk’s role as an executive could fuel class-action lawsuits from disgruntled shareholders, further entangling the board in litigation.
Though Musk’s drug habits might potentially affect his other ventures, particularly SpaceX, Tesla remains the cornerstone of his wealth. His significant stake in Tesla constitutes a substantial portion of his net worth, raising concerns about the impact of his actions on the company’s stability and future.
Board Dynamics and Challenges Ahead
The board composition, largely comprising long-standing members close to Musk, faces scrutiny. Challenges emerged over re-electing members lacking industry expertise and concerns about objectivity. Despite changes like appointing independent directors, questions persist about the board’s effectiveness in addressing governance issues.
Directors like James Murdoch, Kathleen Wilson-Thompson, Joe Gebbia, and JB Straubel, who share personal relationships or history with Musk, add another layer of complexity to the board dynamics, raising questions about independence and decision-making.
The Road Ahead for Tesla
While Musk’s reported drug use may briefly impact Tesla’s shares, analysts believe that long-term investors will likely weather this storm, given Tesla’s historical performance despite Musk’s controversies. The stock’s meteoric rise despite previous incidents suggests a trend of investors choosing to navigate through Musk’s controversies for potential gains.
As Tesla navigates this latest challenge, the board faces mounting pressure to address governance concerns and ensure stability amid Musk’s ongoing personal controversies, which continue to intersect with Tesla’s reputation and future prospects.
I am a law graduate from NLU Lucknow. I have a flair for creative writing and hence in my free time work as a freelance content writer.