Tesla Meta leader Elon Musk and Mark Zuckerberg are set to compete against each other in a Las Vegas cage battle sometime in the near future, although no agreement has been reached. Musk’s mother, May And Without Grimes’ girlfriend.
But no one can tell these industry giants to stop it – not even their companies’ boards of directors. According to corporate governance experts, this is a huge problem for investors and other corporate employees.
said Charles Elson, Edgar S. Chair in Corporate Governance at the University of Delaware.
Musk and Zuckerberg are both unique and invaluable assets to their companies. If one of them left suddenly—or became incapacitated, or worse—that would leave the business in a dire situation: Investors might dump shares, the company’s competitive advantage could weaken, and the organization might lose the vision and leadership style that made it possible. To hire top talent, create popular products, and generate media coverage and publicity.
This so-called key person risk is particularly acute in tech companies with founding CEOs. It’s made explicit in Meta and Tesla’s regulatory filings, the latter of which states that we “are highly dependent on the services of Elon Musk, the Technoking of Tesla, and our CEO.”
Zuckerberg’s “location and importance to Meta” is so vital that the board of directors recently voted to allocate $14 million annually to his personal security.
It’s not unheard of for CEOs to take physical risks – Micron CEO Steve Appleton is dead Flying a kite in 2012, for example — but cage fighting is an activity where some degree of injury is expected. Elson said that in a normal company, a CEO taking that level of physical risk would “never happen.”
“The board used to say, ‘Take your pick – or you get fired,’” said the professor. “It is unbecoming behavior for a responsible leader of an organisation. This is not reality TV. These are large scale organisations. Hundreds of thousands of people work there and rely on stable leadership.”
While the confrontation between Musk and Zuckerberg has drawn much condemnation, much of the criticism has centered around the two business leaders’ outlandish and shameful behavior, and the negative example it sets with regard to violence. But there has been surprisingly little public discussion about the potential harm to companies if a CEO doesn’t leave the cage in the same state it entered (at least six people). It is known that he died during mixed martial arts (MMA) fights).
This may be in part due to the fact that there is very little anyone can do to deter these two particular CEOs. Both Tesla and Meta are publicly traded companies (with a combined market capitalization of more than $1.5 trillion), but their CEOs have extraordinary control over their boards.
In the Meta case, Zuckerberg simply It cannot be separated—since its IPO in 2012, Facebook It has a dual class stock structure that grants the founder 60% of its voting power. Tesla could technically fire Musk, but the automaker Supermajority voting rules It means that no major changes can take place without the approval of two-thirds of the shares. With Musk himself owning about 13% of these shares, this makes it very difficult to achieve any parcel. Last year, Tesla’s own board of directors tried to get rid of the supermajority requirement, but its proposal Failed to achieve an absolute majority.
“This shows me the problem with a dual-class stock or a regulated company like Tesla — that you can do anything and there’s very little anyone else can do about it,” Elson said. “That’s the risk of investing in things like this… There is no accountability.”
according to Morgan Stanley Analysis of the departures of CEOs at major banks in 2017 cited in A Financial management news articleOrganizations that unexpectedly lost a CEO underperformed the market by 11% over the next 12 months. The article advises companies to mitigate risks by establishing solid succession plans. If Meta has a designated successor to Zuckerberg, the company has not said who it is. And when Tesla shareholders sought to force the electric car maker to do so Production of a succession plan At its most recent annual meeting, the company defeated the proposal, arguing that publicly identifying Musk’s successor would put him at a competitive disadvantage.
Cooler heads can prevail
Musk and Zuckerberg They agree to confront them It will end in June. Musk suggested the fight out of annoyance with Meta’s release of strings, a competitor to TwitterMusk’s social media platform that was recently renamed X. Zuckerberg is the favorite to win, as he is already an experienced jujitsu fighter.
Musk was also training in anticipation, however He said This week he was having an MRI of his neck and upper back and “may require surgery before a fight can occur.” Zuckerberg said he proposed the August 26 date, but “didn’t hold his breath” for confirmation from his opponent.
On Wednesday, Musk fueled the idea that he might drop out a description As a “good idea, too,” a suggestion from TED President Chris Anderson of “cage talk” instead of a fight— though he went on to describe fighting as a “noble sport,” adding, “We also hope and humbly express our admiration for those who have fought before for noble causes.”
Like Elson, Columbia Law School’s John Coffey—the school’s Adolph A. Pearl professor of law—feels disdain for the planned cage fight, though he doubts Musk will follow through.
“If that happens, it’s a lose/lose strategy where they’ll walk out of the hair-pulling match with diminished respect from everyone,” Coffey said in an email. “They need a respected figure, like Warren Buffett, to tell them that CEOs shouldn’t act like children (even when they are).”
Neither Meta nor Tesla responded to requests for comment.
This story originally appeared on Fortune.com
5 Side Struggles Where You Might Earn Over $20,000 A Year – All While Working From Home
Looking to earn extra cash? This CD has 5.15% APY now
Buying a home? Here’s the savings
This is how much money you need to earn annually to comfortably buy a $600,000 home