The best scenario is for Musk to stay at Tesla, but something has to change.
It seems the core problem for Musk and Tesla is that he’s surrounded by people unwilling or unable to stand up to him, as can easily happen with powerful people. At worst, this appears to be true of his board.
We think Tesla’s board needs an overhaul. There are too few independent directors and too many directors with long-term relationships to Musk as investors, overlap with other companies like SpaceX, family or otherwise. There’s no one on the board that has Musk’s ear to truly influence him to fix these self-inflicted wounds.
The easiest, most immediate action would be for Musk to resign as chairman of the board and have one of the non-independent directors resign from the board to bring on a new board member as chairperson. There was a vote earlier in the year to remove Musk as chairman, but the voting structure of Tesla’s stock requires a super majority to pass changes. The motion failed.
If Musk were to step down and another director gave up his or her seat, the company could explore bringing on a new chairperson with no ties to Musk that may be able to influence him. Al Gore, currently on Apple’s board, could be an interesting fit given his interest in climate change. Former Boeing CEO Jim McNerney would also be a good option as the former chairman at the company.
Beyond the shift in chairman, other board members with close ties to Musk should consider voluntarily stepping down for the good of the company. It’s in their best interest as shareholders and supporters of Tesla to see the company survive and thrive. Tesla’s chances of success are better with a board that can viably influence the CEO.
Consider Apple’s board, which includes Gore, Arthur Levinson (former CEO Genentech), Bob Iger (CEO Disney), James Bell (former CFO Boeing), Sue Wagner (co-founder, former COO BlackRock) and Ronald Sugar (former CEO Northrop Grumman). Apple isn’t the end-all-be-all, but this is what a board that can influence the CEO of a large, global organization should look like.
We wrote an open letter to Musk last month that made suggestions that were on the minds of many, but people don’t often change. The things that make Musk great are also what make him flawed. Since it’s hard to change people, the better option for Tesla is to figure out a way to change the board.
Time is of the essence, so the voluntary option is best. Without a voluntary change in the board, supermajority voting rules could spell an indefinite stalemate that doesn’t benefit Tesla’s employees, shareholders, the board or even Musk himself.
Gene Munster is managing partner at Loup Ventures and formerly a technology research analyst with Piper Jaffray for 21 years.