Hitting an all-time low. David Bowie's lyrics from Ashes to Ashes were ringing in my ears this morning, as for some reason, I read this article on Yahoo Finance (it originally appeared in Fortune) regarding the corporate governance aspects of the proposed Elon Musk/ Mark Zuckerberg cage match.
If this is the state of the financial media train in August 2023, please stop it. I want to get off.
In no way, shape or form does this article even begin to describe, or even attempt to, the investment merits of Tesla (TSLA) or Meta (META) . I really should have been doing better things with my time than reading it, clearly, but it just shows the massive gap between the effluent that peppers the financial media and actual, useful commentary.
Not only is the article completely irrelevant, it is also rife with unsubstantiated claims. Far be it from me to criticize a man holding the title of Edgar S. Woolard Jr. Chair in Corporate Governance at the University of Delaware - whatever that is - but the "expert" Fortune found, Charles Elson, simply has no idea what he is talking about.
At a normal company, Elson said, a CEO taking this level of physical risk "would never happen."
"The board would say, 'Take your pick-that or being fired," the professor said. "It's conduct that's unbecoming a responsible leader of an organization. This isn't reality television. These are large-scale organizations. Hundreds of thousands of people work there and depend on stable leadership."
Elson gives no examples of such Board activity at any company. The best Fortune can do to back up Elson's unsubstantiated claims is to cite the death of Micron's CEO in an small aircraft accident more than a decade ago. What does that have to do with cage fighting?
The financial media hitting this all-time low has brought me to, after 10 years as a Real Money contributor, somewhere I thought I would never go.
Yes, I am going to defend Elon Musk and Mark Zuckerberg. They are grown men. They can do whatever the hell they want to in their free time.
But what of META and TSLA and Elon and Mark's inarguable statuses as "key men" at those two companies? Zuckerberg's control of META is cemented through his ownership of a super voting class of stock. This is a 1970s (1950s?) style of equity division that is regressive, shareholder-unfriendly and frankly, kind of gross. It's a deal-killer for us at my firm, Excelsior Capital Partners. We don't invest in companies with bifurcated share structures.
But Elon has no such advantage. Tesla only has one class of stock. And despite the existence of what the Fortune article refers to as "supermajority" voting regulations at Tesla (bizarrely citing an article from our sister publication, TheStreet.com, that was written in 2018,) Musk's TSLA stake -13.0% of the shares outstanding, as disclosed in TSLA's 2023 proxy - really doesn't give Elon free rein to do whatever he wants.
Don't get me wrong, Tesla's Board is a joke. It contains Elon's brother Kimbal and only six others (one of whom was added recently,) but corporate governance is often its own reward. In my experience at least 90% of matters brought to shareholder votes at public company annual meetings are purely nuisance items.
It is not the composition of corporate Boards that moves share prices, it is the decisions of the management teams that serve at the pleasure of those Boards.
Tesla's 2023 proxy listed only four Executive Officers (including Elon, the CEO, of course.) One of those officers, 39-year-old CFO Zach Kirkhorn, left his position this week. Isn't that a more relevant issue than a cage match?
Tesla, unlike other automakers, fulfills demand based strictly on orders. It has showrooms, but no dealers. Mid-quarter is exactly when the financial management team would know the likely outcome for quarterly results. Is Kirkhorn's departure announcement, which happened just prior to mid-quarter, telling us that Tesla is going to post yet-another underwhelming quarterly result for Q323? I don't know, because I am too busy reading about a potential cage match!
But that's life in 2023. Social media, including Zuckerberg's Facebook and Instagram and Elon's social network, now known as X, drives public perception. But if you are making investment decisions based on posts on social media--or even worse, posts about the personal lives of social media tycoons - you are really wasting your time.
