News Analysis

Elon Musk isn’t used to dealing with strong boards

by Dan Byrne on Jul 20, 2022

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Elon Musk doesn’t like strong boards

Elon Musk is famous for many reasons. He’s a highly wealthy ground-breaking entrepreneur and owns companies as diverse as Tesla and Space X. So, what’s his relationship like with the various boards he sits on? Is he someone who takes advice or dictates demands? Does he listen or just talk? 

Musk is a man watched the world over for his boldness, bluntness, and his continuing ability to cause a stir in global markets.  

Some laud his get-ahead attitude; others criticise or even fear his unpredictable nature and what it could mean for their long-term prospects.

His relationship with boards has always been one of the fascinating aspects of his business career because it pits this unpredictability directly against people who want everything predicted as far as possible.

Here we have a man who is not afraid to take risks, frequently at odds with individuals whose job it is to study risk as they plan for success and prepare for failure. These two personas can rarely operate without conflict.

Elon Musk’s history with boards

Historically, Elon Musk has sought to prove himself above the boards he works with, with actions and comments that show he expects them to fall in line. His current spat with Twitter’s board is putting this trend to the test.

Visibly more robust in its opposition to Musk, Twitter’s board is adamant that the acquisition deal it signed with the business magnate should be completed in full: no backtracking, no reduced prices, and no extensive due diligence beyond the norm.

So as Musk’s court battle with that board begins, let’s take a look at his track record.

Does Elon Musk have a strategy?

Elon Musk went from barely affording living expenses in 2008 to becoming the wealthiest man in the world by 2021. Would anybody honestly believe that this turnaround was due to good fortunes alone?

That said, many would be forgiven for thinking that Musk doesn’t have a personal business strategy. His decisions sometimes appear to be governed less by structure and more by whims. Other businesspeople don’t amass wealth and power this way.

But at the end of the day, Musk does have a strategy. His success rests on its shoulders. Whether that strategy is carefully planned from the start or is merely a system that has fallen into place, it exists, even if it’s a way of working that boards wouldn’t like.

Musk’s strategic callsigns

Elon Musk is not that keen on business plans.

  •  This is perhaps the factor that would frighten boards the most. He used them in his early days but has since dismissed them as “always wrong” and now insists he “doesn’t bother” with them. In other words, his conscious choice is to avoid the traditional avenue toward profit and success.

He moves fast.

  • Twitter is an excellent example. His drive to buy the social media giant has seen several milestones since April alone. He’s not one to wait around for proper due diligence. Instead, he’ll pinpoint the parts of a business decision that he needs clarity over. If those around him need clarity on other things, the jury’s out on whether they’ll be addressed.

He embraces his passions.

  •  Musk will go for industries where he feels the drive to succeed. Here, it’s not just motivated by profit but by his convictions – tech innovation, greener vehicles, social media – all of these illustrate his goals.If Musk sees a gap in the market, if he finds a personal attachment to it, and if he feels money can be made from doing something about it, he’ll act.

He usually hints and rarely tells.

  • Musk rarely divulges all the information that boards and investors would expect to see when a decision is announced. In 2018, for example, he announced that Tesla could go private at $420 per share without confirming the source of investor funding.  

How dangerous can his tweets be?

Few people have the influence that Elon Musk does; that x-factor ability to influence the markets with thoughts alone … as long as they’re served up in tweet form.

There have been no fewer than 15 occasions when Musk’s tweets have altered markets. Sometimes, he has sparked an upward trend, sometimes downward. But without a doubt, he has more than proven himself to influence the value of products, even if he has nothing to do with them.

Highlights of Musk’s influential tweets

  • He made the value of e-commerce company Etsy surge to record highs after tweeting that he “kinda loves” it.
  • GameStop stock surged by around 50% after tweeting the word “gamestonk” and directing to the Reddit page of Wallstreetbets, where news and speculation around GameStop’s volatile share price were rife.
  • He added 14% to the value of bitcoin simply by adding “#bitcoin’ to his Twitter profile bio.
  • He caused a massive slump in the value of common cryptocurrencies when he announced that his own company, Tesla, would no longer accept bitcoin as payment.
  • He added 11% value to Tesla itself after that 2018 announcement that he was “considering” taking the company private. This got him in trouble for suspected market manipulation with the US Securities and Exchange Commission (SEC) after it was announced later that same month that the privatisation would not go ahead.

Musk’s tweets are nothing special in themselves. In many ways, they could be the words of an average business enthusiast tweeting at home during a slow day at work. But from Musk’s profile, those words carry weight. He has proven this more than enough times.

Are those tweets dangerous? To many, no. But to a risk-conscious board member, the answer would probably be yes, purely because of that unquestionable weight and the impact it can have.

Why doesn’t he want a strong board?

When someone joins a board, they learn the importance of good planning, due diligence, and actions that best serve the company. Any board member working with Elon Musk will know the same information.

Pit this against Musk’s unpredictability and his lack of conventional business strategy, and you get conditions favourable for serious conflict. This is likely a significant factor in why the business magnate doesn’t want to associate with solid boards.

Tesla is the shining example

His history at Tesla puts this in the limelight. Here was a board that worked in the shadows as a rubber-stamp body for years, only emerging to greater prominence in 2019 as criticism of its inner workings – and its ties to Musk – increased.

Musk prefers a rubber-stamp body – one that understands his way of working and supports it. Most boards, for now, are trained to think differently.

Is not having a strong board a threat to his businesses?

Ultimately, yes. As the old Silicon Valley mantra goes, “a good board doesn’t make a company, but a bad board will kill it.”

It’s essential, though, to distinguish between a bad board and a weak one. A weak board simply means the CEO dominates decision-making. Many companies have operated in this way over the years, and some have produced excellent results. Many more, however, have not.

A CEO-dominated board means that an essential organ of opposition is removed. Suddenly, the board does not fulfil its role of objectively judging business decisions and criticising strategies when it feels necessary.

If this is the kind of board Musk wants, he runs the risk of keeping those challenges buried, abandoning a potentially vital source of guidance or warnings.

In summary

Musk has his style, and he has historically shaped boards to match it. Right now, the world waits to see if he will soon take control of Twitter, which has already proven itself to be a more robust board than he’s used to.

If the acquisition deal is forced through in court, then this may be just the beginning of a new chapter in Musk’s relationship with boards. Will he bow to the board’s pressure, will the board bow to his, or will there be a compromise?

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Tags
Boards
Due Diligence
Elon Musk
Strategy

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