The Trillion-Dollar Man: Less bionic, more governance risk

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Article Type
The Wider Lens
Topics
Long-Term Outlook, Opinion
Published
July 15, 2026
Read time
3 mins
Author
Andrew Woods
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Love him or loathe him, there is no doubting that Elon Musk is one of a kind. That uniqueness is reflected not only in his entrepreneurial achievements, but also in the governance practices employed across his listed entities. Musk’s most well-known listed company, Tesla, has long been associated with governance concerns including concentrated decision-making power, limited independent oversight and highly controversial executive compensation arrangements.

 

On the latter point, not so long ago, the very idea of a billion-dollar incentive scheme seemed implausible. Fast forward a few years and the billion-dollar pay package has been surpassed by the prospect of a trillion-dollar one. Leaving aside the question of whether such a payout is appropriate, and notwithstanding the demanding share price targets attached to it, it is difficult to see what an award of this magnitude achieves beyond making the world’s richest man even richer!

 

Supporters argue that such incentives are necessary to keep Musk focused on delivering long-term shareholder value. Critics, however, point to a difficult reality: with so much of the company's valuation tied to Musk himself, there was little appetite to risk him disengaging from the business. Some commentators have estimated that Tesla shares trade at a significant premium purely due to the Musk factor, illustrating the extent to which investors have come to rely on one individual.

 

One might reasonably assume that delivering the targets required to earn such a payout would demand undivided attention. Yet that is far from the case. Musk’s latest venture, SpaceX, has recently floated and he serves as Chief Executive Officer, Chief Technology Officer and Chief Designer. Beyond the obvious questions around capacity and oversight, the governance concerns are numerous.

 

MSCI recently initiated coverage of SpaceX, assigning it a CCC ESG rating, the lowest on its scale, reflecting its view that the company significantly lags peers in managing environmental, social, and governance risks. MSCI has also published a Controversies Report on the Company, giving it a score of one out of ten. As a result, SpaceX has been placed on the watch list for potential misalignment with the principles of the UN Global Compact, the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises.

 

The main governance concerns highlighted centre on the Company's board structure (there is effectively no independent oversight given director tenures and related-party transactions with Musk), ownership concentration and shareholder-rights limitations. Critics point to the effectiveness of independent oversight given director tenures and related-party relationships with Musk, while investors have little practical ability to influence board composition, major corporate transactions or structural governance reform. The founder, chairman and CEO holds 85% of voting power through a dual-class share structure, giving him an extraordinary degree of influence over the company’s direction. No majority voting standard, no proxy access and restricted shareholder voting rights on bylaw amendments and convening meetings, lead to worst-in-class scores even among founder-controlled firms.

 

The company’s governing documents add a further layer of concern. As expressly stated in the Company’s charter, Musk has complete freedom to take for himself any business opportunities presented. He would also be able to arrange related-party transactions that would benefit him at the expense of public investors, sell himself a large fraction of SpaceX’s assets at a favourable price and secure giant pay awards.

 

Adding to these concerns is the way major index providers have effectively adapted their own frameworks to accommodate SpaceX’s scale. Float constraints and shortened trading requirements into major indices have meant that SpaceX has gained entry not because it has demonstrated public-market discipline, robust governance or a sufficient track record as a listed company, but because its sheer size forces benchmarks to make room. This matters because index inclusion can create automatic demand and confer legitimacy. In this instance there is a risk that weak shareholder rights, extreme founder control and limited accountability become viewed as acceptable trade-offs for market capitalisation.

 

Whilst Musk has his fans, the loosening of constraints on his power and associated freedoms should be viewed as troublesome even by his most passionate supporters. For investors, the question is no longer whether Musk is extraordinary, but whether the safeguards around him are strong enough for a trillion-dollar enterprise. On the evidence, the trillion-dollar man looks far less bionic, and far more exposed to governance risk, than the market seems willing to admit.

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Andrew Woods
Responsible Investment Manager
Andrew Woods is a responsible investment manager responsible for voting and engaging with the companies held within the equity and multi-asset portfolios.
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