Elon Musk’s replacement was denied by the Tesla board

In late 2023, The Wall Street Journal dropped a bombshell report claiming Tesla’s board had quietly initiated a search for Elon Musk’s successor as CEO. According to anonymous sources familiar with the matter:

• The board allegedly began the process approximately one month before the report
• Multiple executive search firms were contacted, with one firm reportedly selected to lead the process
• Directors supposedly urged Musk to publicly commit more time to Tesla

The timing is critical. This alleged search coincided with:

• Tesla’s first year-over-year delivery decline since 2020 (8.5% drop in Q1 2024)
• A 13% decline in annual revenue – the first since 2017
• Musk’s increasingly polarizing political engagements

Tesla’s Furious Rebuttal and the Credibility Battle

Within hours of publication, Tesla launched an aggressive counterattack:

1. Official Statement from Chair Robyn Denholm:

• Called the report “absolutely false”
• Claimed the board remains “highly confident” in Musk’s leadership
• Alleged the WSJ was informed of this before publication

2. Musk’s Personal Response:

• Accused WSJ of “EXTREMELY BAD BREACH OF ETHICS”
• Claimed the paper ignored Tesla’s “unequivocal denial”

Journalistic Standoff:
The WSJ maintains it:

• Reached out to Musk for comment (received no response)
• Never received any pre-publication statement from Tesla

This credibility battle raises serious questions about:

• The independence of Tesla’s board
• The reliability of anonymous sourcing
• Musk’s increasingly adversarial relationship with mainstream media

Deep Dive: Tesla’s Board Composition and Governance Concerns

Tesla’s eight-member board has long faced criticism for its close ties to Musk:

Notable Members:

1. Kimbal Musk (Elon’s brother)
2. James Murdoch (son of media mogul Rupert Murdoch)
3. Ira Ehrenpreis (venture capitalist, Tesla director since 2007)
4. Robyn Denholm (Chair since 2018)

Governance Red Flags:

• Lack of Independence: 5 of 8 directors have served over 10 years
• Compensation Controversy: Approved Musk’s $56B pay package (later voided by court)
• Recent Insider Selling: Denholm sold $50M+ in shares over 90 days

Expert Perspective:
“Tesla’s board fails nearly every test of good corporate governance,” says Charles Elson, founding director of the Weinberg Center for Corporate Governance. “The level of entrenchment and lack of independent oversight is unprecedented for a company of this size.”

The Five Critical Challenges Facing Tesla’s Leadership

1. The “Key Person” Risk

Musk isn’t just CEO – he’s Tesla’s:

• Chief product architect
• Primary technology visionary
• Main public spokesperson

Succession Planning Reality:

• Apple began grooming Tim Cook years before Steve Jobs’ passing
• Microsoft had Satya Nadella in leadership pipeline before Ballmer’s exit
• Tesla has no publicly identified successor

2. Musk’s Divided Attention

The billionaire currently oversees:

• SpaceX (CEO)
• Neuralink (Founder)
• The Boring Company (Founder)
• xAI (Founder)
• X/Twitter (Owner)

Time Allocation Impact:

• 2023 analysis shows Musk spent <40% time at Tesla
• Critical product launches (Cybertruck, Roadster) repeatedly delayed

3. Brand Erosion and Political Polarization

Musk’s recent activities:

• Endorsed conservative political candidates
• Acquired Twitter and reinstated banned accounts
• Made controversial statements on gender, COVID, and other hot-button issues

Consumer Impact:

• 2023 survey showed 18% drop in brand favorability among Democrats
• 7% increase among Republicans (showing increasing politicization)

4. Operational Challenges

Production Issues:

• Cybertruck production at 25% of targets
• Model 3 Highland refresh delayed in North America

Financial Pressures:

• Operating margins fell from 19% (2021) to 8% (2023)
• $18B debt load with rising interest expenses

5. Technological Crossroads

Autonomy Delays:

• Full Self-Driving (FSD) still at Level 2 after 10+ years
• Major competitors (Waymo, Cruise) deploying robotaxis

Battery Innovation:

• 4680 cells not meeting energy density targets
• Chinese competitors achieving faster charging speeds

Potential Succession Scenarios and Implications

Internal Candidates Analysis

1. Drew Baglino (Former SVP Powertrain & Energy)

• Strengths: Deep technical expertise, 18-year Tesla veteran
• Weaknesses: Limited public-facing experience, resigned April 2024

2. Tom Zhu (SVP Automotive)

• Strengths: Turned around China operations, production expert
• Weaknesses: Limited autonomy/AI experience

3. Lars Moravy (VP Vehicle Engineering)

• Strengths: Product development leader, respected internally
• Weaknesses: Unknown strategic vision

External Possibilities

Wildcard Option:
Could Tesla recruit an auto industry veteran like:

• Jim Farley (Ford CEO)
• Herbert Diess (Former VW CEO)

Tech Industry Options:

• Jennifer Tejada (Former PagerDuty CEO)
• Gwynne Shotwell (SpaceX COO)

Investor Perspectives: What the Street Is Saying

Bull Case:

• “Musk is irreplaceable as a tech visionary” – Dan Ives, Wedbush
• “Succession planning doesn’t equal imminent change” – Adam Jonas, Morgan Stanley

Bear Case:

• “The board has failed shareholders by not planning sooner” – GLJ Research
• “Tesla needs an operational CEO to complement Musk’s vision” – Bernstein

Institutional Investor Sentiment:

• Vanguard and BlackRock both supported shareholder proposals for better succession planning
• 32% of votes favored independent chair proposal in 2023 (up from 26% in 2022)

Historical Precedents: Lessons From Tech Leadership Transitions

Successful Transitions:

1. Microsoft (Ballmer → Nadella)
   • Key: Clear succession pipeline
   • Result: $500B+ value creation
2. Apple (Jobs → Cook)
   • Key: Multi-year transition period
   • Result: Maintained innovation while scaling

Failed Transitions:

1. Uber (Kalanick → Khosrowshahi)
   • Issue: Crisis-driven change
   • Result: Years of instability
2. WeWork (Neumann → SoftBank takeover)
   • Issue: No planning
   • Result: Near-collapse

The Path Forward: Strategic Recommendations

For Tesla’s Board

1. Formalize Succession Plan
   • Identify 2-3 internal candidates
   • Establish mentorship program
2. Enhance Governance
   • Add independent directors
   • Separate Chair/CEO roles
3. Manage Transparent Communication
   • Public roadmap for leadership development
   • Clear timelines for any transitions

For Investors

1. Monitor These Key Metrics:
   • Musk’s time allocation (via jet tracking, public appearances)
   • Board refreshment (any new independent appointments)
   • Succession-related disclosures in next proxy statement
2. Engagement Priorities:
   • Push for formal succession committee
   • Advocate for board independence

Conclusion: Why This Matters Beyond Tesla

The Tesla leadership saga represents a case study in:

• Founder-led company challenges
• Board governance in disruptive tech
• Investor rights in high-growth firms

As Ark Invest’s Cathie Wood recently noted: “The market isn’t pricing in the key person risk at Tesla. When that changes, it could be dramatic.”

The coming months will prove crucial. Will Tesla:

• Double down on Musk’s leadership?
• Begin a gradual transition?
• Face a crisis-driven change?

One thing is certain: How Tesla navigates this challenge will shape not just its future, but the broader conversation about leadership in transformative companies.