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  • Doug Chia

Tesla's Annual Meeting Makes Elon Musk Look... Good

Elon Musk has never been associated in a positive way with corporate governance. Not by anyone’s standards. Same for securities regulation. I could go through Musk’s many infractions chapter and verse, but I would need an entire academic semester to do it. (Professor Stephen Bainbridge actually teaches a course called “Law of Elon Musk” UCLA Law School!) So, it might surprise you that I’m here to report that the Tesla Inc. Annual Shareholder Meeting and Cyber Roundup 2023 at its Giga Austin factory was one of the best annual meetings I’ve seen in a long time.

Best Practices... at Tesla?

Tesla’s annual meeting checked a lot of boxes on the “best practices” list for annual meetings. It was hybrid, meaning shareholders could attend and participate in person or remotely. It was also streamed on YouTube for any non-shareholder to watch, either live or afterwards. The YouTube webcast allowed viewers to make comments, which were posted in real time. The directors were in the audience, and the independent board chair took the podium to speak. The shareholder proponents were given the mic and spotlight. The company even allowed a resolution to be proposed from the floor, which you rarely see. The meeting started at the civilized time of 3:00 p.m. CDT (I guess no one thought to schedule it for 4:20) and lasted for almost two hours.

The VP of investor relations and board chair took care of the business portion first. Then Musk walked on stage to a wild ovation. Musk spoke in an informal manner and without a script. He showcased new products and products in development (including walking humanoid robots!).

When Musk spoke, he sounded like a normal, down-to-earth guy. During the Q&A session, he seemed to be open to hearing new ideas and enjoy engaging in a back-and-forth discussion. He took questions from the audience and gave off-the-cuff answers. He listened to suggestions from audience members and said he’d consider trying some of them (like ads). He said that even though the floor proposal didn’t pass, Tesla will still conduct a third-party audit of their cobalt supply chain to ensure there is no child labor within any of their cobalt suppliers. When it was all done, Musk exited to an even bigger and louder ovation. He also made a curtain call with one of his kids in his arms!

The Value Proposition

Tesla’s annual meeting humanized Elon Musk. If that was the first time you saw him and knew nothing else about him, you’d think he's a great guy to run a car company and perhaps have a beer with. You’d probably be shocked to hear that he is known to many as a multi-billionaire genius who is prone to do dumb things, can’t be controlled by a board or anyone else, relishes drawing the ire of regulators, blocks critics on Twitter while saying nasty stuff about them even though he bought Twitter in the name of preserving free speech, is reckless with tweets about his potential business moves, and dumps all over ESG, calling it the “Devil incarnate” even though Tesla’s stated mission is “to accelerate the world’s transition to sustainable energy.” You wouldn't think he's the kind of guy who fires employees en masse via mass email and then stiffs them on severance payments.

The fact that Musk was generous with the time and attention he gave to shareholder proponents almost made you forget about the fact that he totally screwed them by moving up the annual meeting date and in doing so pulled the rug from under many would-be shareholder proponents (which is why they had to resort to a floor resolution). This was after having missed the proxy statement filing deadline last year. It almost made you forget that Tesla’s board chair, Robyn Denholm, was facing a potentially embarrassing vote of no confidence from shareholders not named Musk because she was fine with Musk pledging billions of dollars of Tesla stock and bringing one of Tesla’s co-founders and former Chief Technology Officer, J.B. Straubel, onto the board despite his obvious lack of independence. (Denholm ended up with the support of 74.4% of all shares voted. If you back of all shares owned by executive officers and directors as a group, voting support for Denholm’s re-election was 67.2%.)

The short of it is that based on what you read, Musk seems like an arrogant jerk who doesn’t care what people think of him because he’s got more success, adoration, and money than all of his critics put together. But if you were to size him up only by what you witnessed at Tesla’s annual meeting, you wouldn't know that. Or if you did know, you might now take some of it with a grain of salt or come away thinking that he could actually be a decent human being who cares and listens to reason. And that, my friends, shows that there is real potential value in upping your VSM game!

So, what? Just because Tesla had a kick-ass annual meeting doesn’t mean that Elon Musk is now an icon of good corporate governance. It doesn’t change the fact that Tesla’s racial discrimination and sexual harassment issues, combined with its horrendous governance practices, were so bad that Tesla got dropped from the S&P 500 ESG Index—something that seems inconceivable for the world’s leading maker of electric cars. You’d think that Tesla’s E score is so high that it would insulate the company from anything negative on the S and G fronts short of mass murder. And whether or not you agree with S&P’s reasoning, you have to acknowledge that Tesla put itself in the position to be judged that way. Like I once told my kid, you may not have deserved a 5-minute major penalty, but you definitely did something to make the ref blow the whistle and send you off the ice.

What Tesla’s annual meeting shows is that there is value in having a great one. And that’s not only true for CEOs with reputations in need of serious rehab. Berkshire Hathaway’s famous festival of an annual meeting in Omaha has been dubbed “Woodstock for Capitalists.” Johnson & Johnson’s annual meeting used to draw upwards of two-thousand shareholders who left with tears in their eyes after being treated to video testimonials of patients whose lives were saved by J&J products. They also left with a bag full of free products, which made them look forward to next year's meeting. Colgate Palmolive and Starbucks also used to make their annual meetings very retail shareholder friendly. Like almost everyone else, Colgate and Starbucks have stuck with the VSM post-pandemic, but they still put in the effort in to make theirs better than their peers/competitors. (The replays of Colgate and Starbucks are worth watching). Berkshire has gone back to the Warren and Charlie in-person love fest with much of it broadcast live on CNBC (also available for replay).

Just because those companies try, why should my company bother? Because it’s a prime opportunity to showcase all of the great things your company is doing and create a halo effect for your CEO. It’s not just about corporate governance; it’s about your company's (and your CEO's) reputation with all of your stakeholders, including your shareholders. Tesla’s 2023 annual meeting generated lots of positive coverage in the media and among Tesla cult followers. It’s stock also got a nice bump.

Below are some scenes from Tesla's 2023 annual meeting.

Scenes from the Meeting

Elon Musk makes a grand entrance.

New board member, J.B. Straubel, stands and waves to the audience.

Shareholder proponent, Karen Róbertsdóttir of Sumtris ehf, at the mic.

Courtney Wicks of Investor Advocates for Social Justice makes a proposal from the floor.

Viewers watching on YouTube submit a steady stream of comments.

Long lines of shareholders eagerly await their opportunity to ask Musk questions during the Q&A session.

Musk makes a curtain call with his kid in his arms.



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