Inc. Magazine
Tesla may be ready to steer in a new direction—without Elon Musk at the wheel. Amid plunging profits, a crumbling brand image, stale products, and fierce competition, the board is quietly searching for a new CEO. But with a conflicted, Musk-friendly board, real change may be hard to drive.
Author: Bill Saporito
Last year, the board of the Hertz Corporation took the keys away from CEO Stephen Scherr, who decided to step down after the wheels came off the company’s strategy to invest in Teslas and other EVs.
Hertz got stuck with thousands of unwanted electric vehicles because range anxiety—renters’ concerns about how far EVs could go—overcame any wow factor associated with EVs. High sticker prices didn’t help either, especially when Tesla slashed prices of new cars to boost sales, causing the resale value of rental vehicles to plummet.
Now it’s Tesla itself that is stuck with unwanted cars and pickups—and maybe an unwanted CEO.
The Tesla board has reportedly started a search for a new CEO and informed Elon Musk that he needs to spend more time at the company. The search for Musk’s replacement has been going on for about a month, according to the Wall Street Journal. Musk, per the Journal’s reporting, has not resisted his board in this matter. Tesla has denied the story.
But what took so long? The brand is now toxic, thanks to Musk’s hard turn from green EV seller to President Trump’s right hand, a position that Musk seemingly purchased by spending $300 million to get the famously EV-averse president elected.
Musk’s stint as head of the Department of Government Efficiency (DOGE) has earned him even more enmity both inside and outside the White House. The GOP’s nativist wing (Steve Bannon presiding) can’t wait until he exits because Musk is in favor of importing humans—you know, immigrants—to work in tech jobs. He’s also anti-tariff, which you’d expect from a guy who builds cars in China and Europe.
Tesla has paid the price for Musk’s corrosive personality. Profits fell 71 percent in the company’s first quarter of 2025, as sales dropped 11 percent worldwide. Sales were off 50 percent in some European countries and unlikely to rebound, especially as competitors such as Kia, BMW, and Volvo have brought new EVs to market. Keep in mind that in the auto business, when you lose a customer, you don’t get a chance to get them back for five or six years.
None of this had to happen. Musk essentially created the American market for EVs by investing in Tesla as its original founders struggled to bring their vehicle to market. Eventually Tesla, under Musk, learned how to actually manufacture EVs, and sales took off, especially among progressive types: greens, celebs…Democrats.
Then Musk decided, like so many Tesla drivers, to take his hands off the wheel.
Tesla’s offerings are now tired and uninspiring, while its new Cybertruck is a rolling laughingstock of a new product launch. And there’s not much in the way of new models coming down the line other than the much-promoted robotaxi. But a number of analysts think Tesla won’t meet its own deadline, at least not in significant numbers. This is unsurprising, since Musk has been promising and failing to deliver fully self-driving cars for a decade.
In most consumer products companies, if the CEO flops at new products and his erratic behavior damages the brand and alienates a large segment of potential customers, the board would be duty-bound to step in and dump him.
But Tesla isn’t like most companies—and its board is far from ordinary: It not only resisted getting rid of Musk, it has also gone out of its way to overpay him. In conventional terms, the board might be accused of dereliction of duty. Then again, this is Musk’s board—beginning with his brother Kimbal and his former chief technology officer, JB Straubel—leaving just five other board members to act on shareholders’ behalf.
That includes the chair, which is occupied by Robyn Denholm, an Australian tech executive who has been described as “hand-picked” by Musk. She has cashed in more than $500 million in Tesla stock—and with it any credibility about representing the shareholders. Why would she?
In January 2024, the Delaware Court of Chancery agreed with a shareholder plaintiff that Musk’s potential $55.8 billion pay package was a “conflicted-controller” transaction. Was it ever. Rather than accept the court’s decision, the board then put the pay package to a vote of shareholders in the company’s proxy, which won approval.
The board then returned to the court and essentially said, “See, the vote makes your objections inapplicable, so we’re good.” Delaware Court Chancellor Kathaleen McCormick had a laugh at that one. She told the board, “No, you can’t invent new evidence [the shareholder vote] after the fact to undo the ruling that the pay package was excessive.” Because it is excessive.
So Musk, the world’s richest sore loser, took his bat and ball and moved Tesla’s incorporation out of Delaware to Texas, where corporations do whatever they want (see: Enron).
Ideally, if directors like Denholm fail to represent all the shareholders, that role would fall to independent directors. But once again, Tesla comes up short.
Consider James Murdoch. He’s a son of Rupert Murdoch, the Australian publishing magnate and News Corp. honcho. If there’s anyone on the board who knows about standing up to an entitled CEO, it’s James. He has absolute cred as a renegade, having split with his father and brother Lachlan over Fox News’s brand of coverage. He recently joined his sisters in defeating Rupert’s attempt to break a family trust that will divide the empire equally among Murdoch siblings after Rupert, 94, departs the scene.
But James has some baggage here. The Murdoch family’s publicly-held companies have always had two classes of shareholders: Murdoch class and schmo class. The former, controlled by the family, were voting shares, meaning that the Murdochs, even as minority shareholders, could call the shots.
He’s also been friends with Musk from the before times. Which is to say that James is still a prince, and hasn’t yet shown the appetite for toppling a king such as Musk—call it professional courtesy—although he did just dump some Tesla shares.
Another independent director and compensation committee member is Kathleen Wilson-Thompson, a lawyer who was formerly the head of HR at Walgreens Boots Alliance.
If she’s still keeping tabs on her old company, she might note that CEO Rosalind Brewer left Walgreens by “mutual agreement” last year, as in, “don’t let the door hit you on the way out.” Brewer presumably took the fall for not managing the awful mess of a merger she was handed after the Walgreens Boots deal was completed in 2014. Like Tesla, Walgreens’s stock cratered. Unlike Tesla, the board acted—it sold the company to private equity in a transaction valued at up to $23.7 billion.
That leaves us with Joe Gebbia, the co-founder of Airbnb, and Ira Ehrenpreis, founder and managing Partner of DBL Partners, which does impact investing.
Is Gebbia just another tech bro CEO not willing to step up? There’s ample precedent for this throughout corporate history, when Fortune 500 boards were dominated by CEOs (white and male) who would rarely dare to oust a member of the fraternity. Ehrenpreis, as a venture capitalist, would not likely suffer this kind of performance in a startup where his money was parked. But he’s another Musk buddy and an investor in Musk’s other ventures. As head of the compensation committee, he negotiated and defended Musk’s package.
Does the board have a case for enriching the Techno King? Musk’s argument seems to be that Tesla is evolving from a car company to a robotics and AI company and that he is the visionary needed to lead that evolution. There’s something to be said for that. If Tesla pulls off its robotaxi gameplan, all is forgiven. But that’s unlikely.
Which gets to the issue: What, exactly, is Tesla? According to some Tesla analysts, the value of the auto company represents less than 50 percent of the enterprise value. If that’s the case, maybe the board should spin off the auto company and let auto people run it. The AI company can still retain rights to all the data the cars produce. The automotive part of Tesla doesn’t need an entrepreneur right now, it needs an operator—and a full-time one at that.
This wouldn’t be the first case in which an automotive innovator outlives their usefulness. Henry Ford is a classic example.
Tesla doesn’t need Elon Musk, and the board has been either too slow or too cowed to come to that conclusion. The saga of Musk’s calamitous takeover of Twitter-now-X should have been more than enough of a signal that autos were no longer top of mind for him.
What Tesla needs is new products that can compete with the EVs coming out of China, Germany, and South Korea. This is a company that has lost more than $550 billion in market value since December, while the board was planning to hand the boss a compensation package worth $56 billion.
In forming a search party for a new CEO, the board must now be realizing that Tesla can lose that much value without paying Musk for the privilege.
Credits: TCA, LLC.