The Tesla Board’s Failure to Address Concerns about Mr. Musk’s Actions after His Purchase of Twitter
Mr. Musk first announced his intention to purchase Twitter in April 2022 and completed the deal in October of that year, appointing himself as CEO.[1] In December 2022, in a letter[2] to Tesla’s Chair of the Board of Directors, Dr. Robyn Denholm, I expressed my concerns about the corporate governance issues raised by the structure of Mr. Musk’s deal to buy Twitter and his actions after becoming CEO, including:
- The possible misappropriation of Tesla resources by Mr. Musk’s funneling of “more than 50 of his trusted Tesla employees” to work on his Twitter takeover, including Tesla’s Chief Information Officer and other senior staff.[3] This use of Tesla employees raised obvious questions about whether Mr. Musk appropriated resources from a publicly traded firm, Tesla, to benefit his own private company, Twitter. This would potentially violate Mr. Musk’s legal duty of loyalty to Tesla and trigger questions about the Board’s responsibility to prevent such actions, and may also run afoul other “antitunneling” rules that aim to prevent corporate insiders from extracting resources from their firms.[4]
- Inevitable conflicts of interest arising from, for example, Twitter’s reliance on advertising revenue from automobile companies that are in direct competition with Tesla, including Audi, Chevrolet, Ford, GM, Jeep, and Volkswagen.[5] As the owner of Twitter, Mr. Musk could decide to run the company to maximize badly needed revenue, even if that includes great deals for Tesla’s competitors and potential injury to Tesla. Alternatively, Mr. Musk could run Twitter to benefit Tesla through favorable algorithms or free advertising. These concerns have only grown since Tesla recently announced its intention to begin
- ↑ Reuters, “Explainer: How Elon Musk funded the $44 billion Twitter deal,” Hyunjoo Jin and Chibuike Oguh, October 28, 2022, https://www.reuters.com/markets/us/how-will-elon-musk-pay-twitter-2022-10-07/; CNBC, “Elon Musk now in charge of Twitter, CEO and CFO have left, sources say,” David Faber and Jonathan Vanian, October 27, 2022, https://www.cnbc.com/2022/10/27/elon-musk-now-in-charge-of-twitter-ceo-and-cfo-have-left-sources-say.html. .
- ↑ Letter from Senator Elizabeth Warren to Tesla Chairman of the Board Dr. Robyn Denholm, December 18, 2022, https://www.warren.senate.gov/oversight/letters/senator-warren-questions-tesla-board-chairman-on-conflicts-ofinterest-with-elon-musks-takeover-of-twitter.
- ↑ NBC News, “Elon Musk has pulled more than 50 Tesla employees into his Twitter takeover,” Lora Kolodny, October 31, 2022, https://www.nbcnews.com/tech/tech-news/elon-musk-pulled-50-tesla-employees-twittertakeoverrcna54946; CNBC, “SpaceX, Tesla, and Boring Company execs are helping Elon Musk at Twitter, records reveal,” Lora Kolodny, December 8, 2022, https://www.cnbc.com/2022/12/08/spacex-tesla-and-boring-companyexecshelping-musk-at-twitter.html.
- ↑ See, e.g., Atanasov, Vladimir & Black, Bernard & Ciccotello, Conrad. (2011). Law and Tunneling. Journal of Corporation Law. 37, https://ecgi.global/sites/default/files/working_papers/documents/SSRN-id1444414.pdf.
- ↑ Business Insider, “Tesla competitor GM will reportedly temporarily suspend advertising on Twitter after Elon Musk's takeover,” Samantha Delouya, October 28, 2022, https://www.businessinsider.com/telsa-competitor-general-motors-suspends-twitter-advertising-elon-musk-takeover-2022-10; Wall Street Journal, “General Mills, Audi and Pfizer Join Growing List of Companies Pausing Twitter Ads,” Suzanne Vranica and Patience Haggin, November 3, 2022, https://www.wsj.com/articles/general-mills-audi-and-pfizer-join-growing-list-of-companies-pausing-twitter-ads-11667507765; Media Matters, “In less than a month, Elon Musk has driven away half of Twitter’s top 100 advertisers,” Sharon Kann and Angela Carusone, November 22, 2022, https://www.mediamatters.org/elon-musk/less-month-elon-musk-has-driven-away-half-twitters-top-100-advertisers.
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