September 21, 2019 Finance and Tech Publication

Elon Musk is not the problem at Tesla — blame the people around him

NEW YORK, NY – APRIL 4: Tesla CEO Elon Musk arrives at federal court, April 4, 2019 in New York City. A federal judge will hear oral arguments this afternoon in a lawsuit brought by the U.S. Securities and Exchange Commission (SEC) that seeks to hold Musk in contempt for violating a settlement deal. (Photo by Drew Angerer/Getty Images)

Drew Angerer | Getty Images News | Getty Images

Tesla CEO Elon Musk epitomizes the reason so many people place their total trust in a leader with a view on changing the world. Musk has a heady vision of what he wants to create. And he does not shy away from any challenge; he runs straight at them. Musk is a dyed-in-the-wool trailblazer and rule breaker. With a powerful leader like Musk at the helm, what else do we need to do? What could possibly go wrong?

Quite a lot it turns out. Musk has behaved so erratically in the past few years that many have questioned his ability to lead. Tesla shares slumped after a bizarre earnings call during which Mr. Musk cut off an analyst saying, “boring bonehead questions are not cool”. Then came his attempted involvement in the rescue of the 12 boys trapped in a flooded cave in Thailand. Later he flummoxed investors and sent the share price on a rollercoaster ride with a tweet about taking the company private. As a result, the SEC bristled, leveled a fine and called for changes in the board.

Partly as a result of Musk’s leadership style, shorting Tesla stock has become a common bet for investors. It was the most shorted stock in 2018 and shows signs of continuing in that vein in 2019. The stock is down more than 25% this year.

Musk is not the only game-changing leader with confusing and obstreperous behavior. He typifies the problem we create when we give a maverick CEO the nod to be visionary and break the rules but neglect to add sufficient governance and support.

Steve Jobs was a visionary leader at Apple, but he also had a reputation for being a difficult, cantankerous jerk. At one point, things got so bad the board fired him. Elizabeth Holmes, CEO at Theranos, thrilled investors with her vision to change healthcare but then was charged with multiple counts of fraud and conspiracy in federal court after investors lost nearly a billion dollars of their investment in her company. Travis Kalanick’s leadership at Uber changed the city transportation industry, but it also led him to be ousted from the company he founded.

The lure of a gifted trailblazer with the ability to create a powerhouse company that challenges the status quo is a magnetic draw for investors and employees. Musk is currently one of the most visible, but he is not the only maverick we will have to deal with in the coming years.

Sometimes these visionaries deliver on their vision. But other times they create havoc.

We spoke to a number of experienced board members and execs to learn how to handle these kinds of leaders. They agreed that with an inspired powerhouse like Musk at the helm, the stakeholders — the board, investors, executives, and employees — need to be ready for a different kind of journey. Traditional corporate governance principles are needed, but they must be supplemented with additional practices.

Here are some of the things Musk’s stakeholders need to do.

Close the door — hold executive sessions that make sure the board and executive team are active, properly structured, and engaged in making the maverick CEO a winner. They need to build a supportive governance network without weaponizing the board and destroying winning bets.

Mind the gaps — fill in management holes in the CEO’s repertoire of skills. Adding a seasoned leader as COO would complement Musk’s visionary leadership.

Curate the culture — Culture eats strategy for breakfast, as a common business saying goes. Build board processes to monitor the company culture the CEO is creating. Stakeholders need keep a watchful eye out to make sure things are going well.

Be contrarian — make constructive conversations of alternatives a standard practice. Every board member said it is not easy to do but it is essential.

Build paths of least resistance — establish one-on-one channels between the CEO and the board. Even Steve Jobs talked to select board members that acted as mentors.

The best visionary-led companies have a collaborative give-and-take between the CEO, board, and executive team. The brilliant boss’s job is to create a highly valuable, robust, and sustainable company for all stakeholders. The performance of board members, executives, and investors is judged on how well they help make that happen.

Tesla stakeholders — investors, employees, executives, and the board — need to realize that the mixture of brilliance and mischief is a result of two things: Musk’s maverick mindset and the ways he is governed. Embracing Musk’s brilliance carries the responsibility to govern.

Rob Shelton is a globally recognized Silicon Valley-based consultant, author, and speaker on entrepreneurs and innovation. Marc J. Epstein, Ph.D, is the former professor at Stanford Business School, Harvard Business School, and INSEAD and former Distinguished Research Professor of Management at Jones Graduate School of Business at Rice University in Houston, Texas. Their new book is “The Brilliant Jerk Conundrum.” You can connect with them at theconundrumpress@gmail.com.

Follow @CNBCTech on Twitter for the latest tech industry news.

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