Tesla as a Global Competitor: Strategic Control in the EV Transition

Matt Hopkins and William Lazonick
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Matt Hopkins: Academic-Industry Research Network
William Lazonick: Academic-Industry Research Network

No inetwp225, Working Papers Series from Institute for New Economic Thinking

Abstract: In this paper, we assess the implications of Elon Musk's strategic control over Tesla, the pioneering company that has become central to the electric-vehicle transition. We document how, as Tesla's CEO for 16 years, Musk has exercised strategic control to direct the transformation of the company from an uncertain startup to a global leader. Now that Tesla is profitable corporate predators (aka hedge-fund activists) may challenge Musk's strategic control - a possibility of which the CEO is well aware. To retain his control over Tesla as a publicly listed company, Musk depends on holding a sufficient proportion of Tesla's shares outstanding to possess the voting power to fend off predatory value extractors. In addition to accumulating Tesla shares by investing $291.2 million at early stages of the company's evolution, Musk has relied upon massive stock-option grants from the Tesla board, under the guise of "compensation", in 2009, 2012, and 2018, to boost his shareholding and, with it, his voting power. Hence the Delaware Court of Chancery's decision in January 2024 to rescind Musk's 2018 stock-option package - by far the largest ever granted to a corporate executive - poses a threat to Musk's strategic control at Tesla. As the "Technoking" of Tesla strategizes to maintain his control over the company's decision-making, anyone concerned with the role that Tesla will play in the evolving EV transition should be asking how CEO Musk might use, or abuse, his powerful position.

Keywords: Elon Musk; Tesla; electric vehicles; strategic control; stock options; voting power; resource allocation; corporate governance (search for similar items in EconPapers)
JEL-codes: D2 D31 G3 J33 L2 L53 L62 M1 N8 O16 O32 Q55 (search for similar items in EconPapers)
Pages: 103 pages
Date: 2024-09-07
New Economics Papers: this item is included in nep-ene
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Persistent link: https://EconPapers.repec.org/RePEc:thk:wpaper:inetwp225

DOI: 10.36687/inetwp225

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