Read the two attached WSJ articlesand upload a 1-page double-spaced response to the following questions. Connect your discussion to Chapter 7 where relevant.
Co-CEOs are Out of Style...
a. What types and/or sources of power are relevant for understanding co-CEO arrangements?
b.The twin-CEO structure has had a mixed record at the few companies where it has been tried over the years. What are some of the likely reasons that power-sharing arrangements are rare in business and other types of organizations?
Tesla Braces for Uncertainty...
a. What is the change in Elon Musk’s role at Tesla? Identify what specific types of power may be lost, gained, and/or retained by Musk after the change.
b. What factors or issues are playing a role in the power changes described in the article?
Tesla Braces for Uncertainty Amid Shift in Elon Musk’s Role - WSJ 8/6/20, 10)07 AMTesla Braces for Uncertainty Amid Shift in Elon Muskʼs Role - WSJ Page 1 of 4https://www.wsj.com/articles/tesla-braces-for-uncertainty-amid-shift-in-musks-role-1538352138?mod=searchresults&page=1&pos=1 Elon Musk’s removal as chairman of Tesla Inc. potentially weakens his grip, as investors hope a remade board will help the entrepreneur focus on solving production problems that have threatened to stymie the car maker’s move into the mainstream. Mr. Musk’s deal with U.S. securities regulators, a stunning turnaround announced over the weekend, allows him to remain chief executive and keep his board seat—terms that permit the man who has become synonymous with Tesla to retain a considerable degree of power. The Securities and Exchange Commission had originally sought to bar Mr. Musk from being an officer at any publicly traded company. Instead, Mr. Musk is banned from serving in the chairman role at Tesla for three years. Tesla also must add two new independent directors and establish better controls over Mr. Musk’s communications. The choice to head the board will help determine just how significant the settlement’s impact is on Tesla’s governance. The deal requires the company to choose an independent chairman, but that person could be an outsider or one of several existing directors the board deems independent but who have backed Mr. Musk for years. An outsider likely This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit https://www.djreprints.com. https://www.wsj.com/articles/tesla-braces-for-uncertainty-amid-shift-in-musks-role-1538352138 TECH Tesla Braces for Uncertainty Amid Shi! in Elon Musk’s Role Investors hope a remade board will help the entrepreneur focus on solving production problems Elon Musk agreed to step down as Tesla’s chairman but he was allowed to remain chief executive. PHOTO: LUCY NICHOLSON/REUTERS By , and Sept. 30, 2018 8:02 pm ET Tim Higgins Susan Pulliam Dave Michaels TSLA -0.36% ▲ https://www.wsj.com/articles/elon-musk-can-remain-tesla-ceo-but-must-step-down-as-chairman-in-sec-settlement-1538257394?mod=article_inline https://www.wsj.com/market-data/quotes/TSLA https://www.wsj.com/articles/elon-musk-sued-by-the-sec-for-securities-fraud-1538079650?mod=article_inline 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https://www.wsj.com/news/technology?mod=breadcrumb https://www.wsj.com/market-data/quotes/TSLA?mod=chiclets 8/6/20, 10)07 AMTesla Braces for Uncertainty Amid Shift in Elon Muskʼs Role - WSJ Page 2 of 4https://www.wsj.com/articles/tesla-braces-for-uncertainty-amid-shift-in-musks-role-1538352138?mod=searchresults&page=1&pos=1 would have a better chance of dampening Mr. Musk’s significant influence. The most noticeable limitation on Mr. Musk could be to his megaphone. Tesla is on the hook to better vet his tweets and other pronouncements that contain information deemed material to the auto maker. Mr. Musk’s prolific use of Twitter is part of his allure, helping him build a persona unlike other CEOs. The Justice Department, meanwhile, also is investigating Mr. Musk’s tweets, though it didn’t bring a parallel criminal case Thursday. The SEC typically doesn’t settle a civil case if the Justice Department is expected to bring a criminal one, though it isn’t clear in this instance how closely the departments coordinated efforts, people close to the situation said. The board additions could tip the balance of power in a nine-person group that has been dogged by criticism for failing to rein in Mr. Musk during months of self-inflicted dust- ups. The most dramatic episode, Mr. Musk’s messages on Twitter on Aug. 7 that he had secured funding to possibly take Tesla private, led to an SEC investigation. The agency filed suit Thursday, alleging that his statements were misleading. Mr. Musk believed he had a verbal agreement in place with Saudi Arabia’s sovereign-wealth fund to help finance the plan, according to a person familiar with the matter. The settlement, announced days after Mr. Musk walked away from a deal and appeared ready to fight the SEC, calls for $40 million in fines from Mr. Musk and Tesla. Tesla declined to comment on the ramifications of the settlement. Ross Gerber, CEO of Gerber Kawasaki Wealth & Investment Management, praised the settlement, saying it could bring institutional investors back into the fold. “I think a super strong outsider would send the best message.” Mr. Gerber, whose firm owns Tesla shares, said, “Most investors were starting to feel this was an Elon ride, not a company.” He added, “Tesla is a big company and this was their growing-up moment.” Even without Mr. Musk’s recent spate of controversies, Tesla has been driving along on the edge. The CEO promised to sharply increase production of the Model 3 sedan in the third quarter, keeping the rate of production at a level that the 15-year-old auto maker had never come close to in the past, all to prove to Wall Street that the company could become cash positive and generate the money needed to avoid raising more capital. From pulling all-nighters to micromanaging engineering tasks, Mr. Musk has acted more like the head of a startup than CEO of an auto maker with a market value that rivals General Motors Co. Mr. Musk has been able to reign at Tesla because he is the creative force behind a new luxury car brand that has pushed the auto industry toward developing its own electric vehicles. His vision for electric cars that drive themselves has allowed Mr. Musk to tap capital markets to fund Tesla’s growth and propel Tesla’s shares higher. On Friday, those shares plunged nearly 14% following the revelation Mr. Musk had turned RELATED Elon Musk to Step Down as Tesla Chairman, Remain CEO (Sept. 29) • SEC Sues Elon Musk for Fraud, Seeks Removal From Tesla (Sept. 27) • https://www.wsj.com/market-data/quotes/GM https://www.wsj.com/articles/elon-musk-can-remain-tesla-ceo-but-must-step-down-as-chairman-in-sec-settlement-1538257394?mod=article_inline https://www.wsj.com/articles/elon-musk-sued-by-the-sec-for-securities-fraud-1538079650?mod=article_inline 8/6/20, 10)07 AMTesla Braces for Uncertainty Amid Shift in Elon Muskʼs Role - WSJ Page 3 of 4https://www.wsj.com/articles/tesla-braces-for-uncertainty-amid-shift-in-musks-role-1538352138?mod=searchresults&page=1&pos=1 down a settlement. Should the SEC prevail in its suit, analysts cautioned, Tesla’s CEO could be gone—and with it the company’s potential to raise money. Tesla shares closed Friday at $264.77. David Whiston, an analyst for Morningstar Research Services, noted that Tesla “has a $920 million convertible bond coming due in March that Tesla has to repay in cash if the stock is not at least $359.87.” On Friday, it appeared Mr. Musk was girding for a drawn-out fight with the SEC. A person familiar with his thinking said the CEO believed the SEC’s argument was flawed and that he could prevail in court. Mr. Musk also added a new lawyer to his team, former federal prosecutor Chris Clark, who had successfully represented billionaire entrepreneur Mark Cuban in a 2013 insider-trading trial against the SEC. In private, however, Mr. Musk’s team was working to smooth things out with the SEC, which was unhappy he walked away from a deal shortly before it was supposed to be announced Thursday. His team already had been facing an uphill battle—earlier in September, hours before Mr. Musk’s lawyers went to the SEC hoping to convince the agency to drop its case, a person familiar with the matter said, Mr. Musk took a puff from a blunt while appearing on a live interview broadcast on YouTube. After Mr. Musk backed out of the first deal—and the company’s shares took another drubbing—the SEC wanted a tougher settlement: the deal reached Saturday roughly doubled his fine to $20 million and tacked on an additional year to Mr. Musk’s ban from being Tesla chairman, a person familiar with the investigation said. Mr. Musk ultimately changed his mind, believing it was in the best interest of the company, himself and shareholders, a person familiar with his thinking has said. SEC Chairman Jay Clayton said in a statement that the settlement, including the addition of two new Tesla directors, was in the best interests of investors. Investors earlier this year had rejected a shareholder proposal to break up the role of CEO and chairman. Separately, they approved the board’s proposed $2.62 billion pay package for Mr. Musk if he reaches numerous milestones over the next decade. Tesla, under fire over the independence of its board, last year named two new independent directors, media executives Linda Johnson Rice and James Murdoch. That took the board’s size to nine, including Mr. Musk and his brother Kimbal. The board also includes three members who have long been investors in Musk ventures. Another member used to be finance chief at SolarCity Corp., where Mr. Musk had been chairman until Tesla acquired it in 2016. “To put it bluntly, Tesla’s maturity compared to other public companies of its market capitalization has been below average,” Joseph Spak, an analyst with RBC Capital N E W S L E T T E R S I G N -U PN E W S L E T T E R S I G N -U P Technology A weekly digest of tech reviews, headlines, columns and your questions answered by WSJ's Personal Tech gurus. PREVIEW SUBSCRIBE https://www.wsj.com/articles/tesla-gives-elon-musk-new-10-year-pay-for-performance-deal-1516737688?mod=article_inline 8/6/20, 10)07 AMTesla Braces for Uncertainty Amid Shift in Elon Muskʼs Role - WSJ Page 4 of 4https://www.wsj.com/articles/tesla-braces-for-uncertainty-amid-shift-in-musks-role-1538352138?mod=searchresults&page=1&pos=1 Markets, said Sunday in a note. He said splitting the CEO and chairman roles, and the new directors, were positive steps, though much depends on who is named. Dieter Waizenegger, executive director of CtW Investment Group, which represents union-sponsored pension funds that own Tesla shares, said the challenge for Tesla’s board is to appoint new members who don’t come from Mr. Musk’s orbit. “You have to have a board that he takes seriously,” he said. Write to Tim Higgins at
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[email protected] Appeared in the October 1, 2018, print edition as 'Tesla Braces for Uncertainty Amid Shift in Musk’s Role.' Copyright © 2020 Dow Jones & Company, Inc. All Rights Reserved This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit https://www.djreprints.com. mailto:
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[email protected] Co-CEOs Are Out of Style. Why Is Netflix Resurrecting the Management Model? - WSJ 8/6/20, 9)48 AMCo-CEOs Are Out of Style. Why Is Netflix Resurrecting the Management Model? - WSJ Page 1 of 3https://www.wsj.com/articles/co-ceos-are-out-of-style-why-is-netflix-resurrecting-the-management-model-11594987416 Netflix Inc.’s decision to elevate the company’s chief content officer to co- chief executive—a surprise power-sharing agreement with co-founder Reed Hastings— has created a rare, counterintuitive management arrangement: dual chief executives. In the S&P 500, few companies have co-CEO arrangements, and a number have recently abandoned the structure, slimming down to a lone executive at the helm. Salesforce.com Inc. ended its 18-month experiment with twin-CEOs in February, leaving Marc Benioff at the top. German software giant SAP SE ditched its dual-CEO model in April after less than six months. Oracle Corp. in December said it wouldn’t return to a two-CEO arrangement following the death of co-CEO Mark Hurd, leaving Safra Catz as the company’s sole chief executive. Human nature prevents many co-CEO setups from succeeding, corporate governance