Elon Musk’s Influence Over SpaceX Examined

Corporate governance specialists have highlighted certain practices by SpaceX that seem to prioritize Elon Musk over other shareholders. These experts have drawn attention to the board’s structure and Musk’s compensation package as examples.

Central to Musk’s strong influence over SpaceX is his control over “super voting” shares.

SpaceX’s Unique Compensation and Governance Structures

In January, SpaceX awarded Musk, the founder and CEO, with a significant pay package involving 1.3 billion restricted shares. The award hinged on SpaceX achieving two ambitious goals: establishing a million-person colony on Mars and launching powerful data centers in space. Despite not meeting these objectives, Musk is still allowed to vote these 1.3 billion shares in shareholder decisions, per the company’s offering prospectus revealed on Wednesday. Essentially, SpaceX permits Musk to vote shares he hasn’t earned.

“This is unprecedented,” noted Ann Lipton, a law professor at the University of Colorado, Boulder, adding that Musk found a way to bypass conventional corporate rules.

Besides this compensation package, SpaceX’s other corporate governance choices are coming to light as it prepares for what may become the largest initial public offering (IPO) ever. The company, known for its rocket production and Starlink satellite internet service, values itself at over $1.25 trillion. The upcoming IPO could generate significant earnings for Wall Street, Silicon Valley, and Musk himself.

Board Composition and Arbitration Plans

SpaceX plans to deviate from typical board structures. The company will not require a majority of independent directors and will not use a board committee of independent members to establish executive pay, contrary to common practices. It also mandates that any shareholder claims under federal securities law be settled through arbitration.

These arrangements appear to benefit Musk significantly. He already controls 85% of shareholder votes. These measures enable him to appoint more insiders to SpaceX’s board, select those who set his compensation, and largely shield himself from shareholder lawsuits.