Why Tesla Shareholder Tried and Failed to Remove Elon Musk as Chairman
Musk has become synonymous with Tesla, but that also comes with a risk that some of Tesla’s shareholders are unwilling to take.
Tesla shareholders met on June 5th for its annual Meeting of Stockholders. One of the proposals, brought forth by Tesla shareholder Jing Zhao, was Musk’s replacement as Chairman of the Board with an independent Chairman.
There’s nothing especially out of the ordinary with Zhao’s request. There has been a pronounced movement towards independent board members for some time. In fact Tesla itself had to give in to pressure to add an independent board member last year. In the US just under 30% of all S&P 500 companies have done the same by appointing an independent Chairman.
The argument made by Zhao was that “prevailing practice” internationally is for Chairman to be independent. But it also speaks to Musk’s other interest, such as SpaceX, SolarCity, and the Boring company which bring his independence into question.
“Musk is creating one of the most powerful and recognizable brands in the world, in large part, around the sheer fascination with him as a person.”
Clearly, however, Tesla is not your typical company. It’s name is synonymous with Musk. And, in many ways, Musk is leveraging his multitude of interests through creative synergy. Think, for example, about the SpaceX launch of a Tesla roadster, which probably got more free publicity for Tesla than it could have possibly purchased.
Oh, wait, Tesla has zero budget for paid advertising. Yes, exactly, that’s one of the points here.
Musk has been able to do something that very few founders and CEOs have been able to pull off. Even legendary Steve Jobs couldn’t rely on just his name to promote Apple. The simple, and profoundly interesting, fact is that Musk is creating one of the most powerful and recognizable brands in the world, in large part, around the sheer fascination with him as a person.
We can argue the merits of that all we want. Clearly there is risk in having the founder/CEO/Chairman loom so large over a brand. But I’m not sure the risk is as great as we think. The same was said of Jobs prior to his passing in 2011. Yet Apple’s market capitalization has nearly quadrupled since that time.
Also, consider that Fiat Chrysler, Ford, and GM spend $2.2, $2.5, $3.1 billion respectively on advertising. That’s one heck of a contribution to Tesla’s bottom line that pretty much all stems from Musk’s gravitas.
Given all that, it’s no surprise that Tesla’s board is asking shareholders to vote against the proposal. Which undoubtedly they will.
The larger lesson here, however, is that the one thing we are most draw to is personas. It’s in our DNA to seek out and follow the lead of extraordinary people. Is that always a good thing? No, history is littered with examples where that has had very bad outcomes.
But, if you want people to really pay attention then nothing attracts markets more than a larger than life persona. If you’re thinking, “Well, yes, but I’m just an entrepreneur trying to build a business.” Think again. In many ways you are your company. Your behaviors, vision, charisma, and ability to create your own gravity are a cornerstone of your brand. Unfortunately, I see far too few entrepreneurs that seriously enough.
It’s also worth noting that what we may be witnessing, in Musk’s rise to prominence, is one of the most amazing success stories of the 21st Century in progress; one that will be talked about and looked back on 100 years from now in the same way that we marvel at the ingenuity of some of the early 20th Century’s pioneers.
Whatever you may think of Musk, there’s an abundance of lessons for every entrepreneur in how he has built both his company’ brands and his own.
This article was originally published on Inc.
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Tom Koulopoulos is the author of 10 books and founder of the Delphi Group, a 25-year-old Boston-based think tank and a past Inc. 500 company that focuses on innovation and the future of business. He tweets from @tkspeaks.
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