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Tesla is shaken by Musk’s demand for voting control

Elon Musk's attempt to gain more voting power at Tesla raises governance issues and casts doubt on possible conflicts and the company's future course

Elon Musk seeks more control over Tesla

Musk’s Concerns: AI Leadership Outside Tesla

According to governance experts and analysts, Elon Musk’s warning about the advancement of AI and robotics outside of Tesla, excluding him from gaining more voting power, would make it more difficult for him to carry out his duties as CEO and raises questions about the company’s valuation. The outspoken billionaire said on Monday that he would be uncomfortable leading Tesla into the forefront of these technologies if he didn’t obtain about 25% of the company’s voting power.

On his social media site, X, Musk stated that he would prefer to have significant influence over entire control over developing items outside of Tesla. 

Musk’s Bid for Tesla Influence Sparks Concerns

Elon Musk has drawn a lot of attention with his recent announcement that he wants to increase his voting power in Tesla, suggesting that the firm may be heading in a different route. Musk, who has made a name for himself by marketing Tesla as a “AI/robotics company” because of the company’s innovations in “Full Self-Driving” software and humanoid robot prototypes, has now stated that he will not be satisfied till he gains about 25% of the voting power.

Analysts and specialists in governance are concerned about Musk’s sudden shift in position. Professor Ann Lipton of Tulane Law School stressed that Musk’s statements raise the possibility of a conflict of interest in which his private businesses could benefit from lucrative prospects for Tesla. One could argue that Musk’s actions violate his fiduciary duty to Tesla.

The corporate opportunity theory, a legal precept that forbids CEOs and directors from seizing business possibilities that legally belong to the company, is affected by Musk’s comments. The Weinberg Center for Corporate Governance’s founding director, Charles Elson, emphasized that it might be illegal for Musk to move forward with developing technology that Tesla has advertised without the company’s consent.

Musk’s Power Play Raises Corporate Concerns

Experts assess the possible consequences of this action, speculating that moving Tesla’s technological development outside of the firm could reduce its share value by removing chances for expansion. Musk is the owner of several businesses, including SpaceX, Neuralink, X, and xAI. He also has a 13% share in Tesla. However, because of significant stock transactions in recent years, his voting power at Tesla has decreased.

One could argue that Musk wants more power for reasons that are unclear. Some observers see it as a ploy to get attention before a Delaware court rules on his previous remuneration arrangement. Musk is awaiting a decision in a shareholder case that claims he obtained an excessive salary package without working a full-time job at Tesla by abusing his power over the board.

The impending court decision might affect Musk’s pay and have an effect on board talks. Musk blames delays on the court’s ruling and refutes any conflict with the board on his new compensation plan. Some experts predict that the board won’t be too hostile because of Musk’s importance at Tesla and his close relationships to a number of board members, including his brother Kimbal.

Musk’s Requests Encourage Doubt and Concern

According to analyst Ryan Brinkman of J.P. Morgan, Musk’s remarks may make it more likely that he will step down as CEO or result in the awarding of shares that would reduce investors’ ownership. Musk may be using his public statement as a tactic to put pressure on the board to accede to his requests.

Speculators point out that Tesla might have trouble striking a balance between the demands of Musk and the interests of investors, especially significant shareholders like Vanguard and BlackRock. Musk has stressed the significance of Tesla in the fields of robots and artificial intelligence, therefore the business may need to find a way to prevent these developments. According to Deepwater Asset Management managing partner Gene Munster, if Musk’s expectations are not met, there’s a chance that these vital areas would stagnate and that investors’ interests may not be served.

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