Tesla Motors: The Evolution of Governance from Inception to IPO

Abstract:     
In June 2010, Tesla Motors raised over $225 million in an initial public offering that valued the electric car manufacturer at $2 billion. It was the first time a U.S. automobile company went public since Ford Motor in 1956.

The evolution of Tesla - first incorporated in 2003 by engineers Martin Eberhard and Marc Tarpenning - in some ways has been unique, given the nature of its business. At the same time, Tesla has faced organizational challenges that are common to most public and private corporations. We examine the prominent features of the company’s governance system as it has evolved from inception to IPO, including the board of directors, antitakeover protections, and executive compensation program. In each case, the system changed to match the current needs of the company.

Many experts prescribe a one-size-fits-all approach to governance. Why don’t they do a better job of taking into account the company’s specific situation and needs? Now that Tesla is public, how might we expect its governance system to change in the future?

Topics, Issues and Controversies in Corporate Governance: The Closer Look series is a collection of short case studies through which we explore topics, issues, and controversies in corporate governance. In each study, we take a targeted look at a specific issue that is relevant to the current debate on governance and explain why it is so important.

Number of Pages in PDF File: 7

Keywords: Tesla, corporate governance, IPO, governance structure, board of directors, antitakeover protections, executive compensation

JEL Classification: G30, G34, G39

Accepted Paper Series