Tesla Motors: The Evolution of Governance from Inception to IPO

7 Pages Posted: 18 May 2011 Last revised: 3 Sep 2013

See all articles by David F. Larcker

David F. Larcker

Stanford University - Graduate School of Business

Brian Tayan

Stanford University - Graduate School of Business

Date Written: May 16, 2011

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 and Leadership: 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. Larcker and Tayan are co-authors of the book Corporate Governance Matters, and A Real Look at Real World Corporate Governance.

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

JEL Classification: G30, G34, G39

Suggested Citation

Larcker, David F. and Tayan, Brian, Tesla Motors: The Evolution of Governance from Inception to IPO (May 16, 2011). Rock Center for Corporate Governance at Stanford University Closer Look Series: Topics, Issues and Controversies in Corporate Governance No. CGRP-15 . Available at SSRN: https://ssrn.com/abstract=1845715 or http://dx.doi.org/10.2139/ssrn.1845715

David F. Larcker (Contact Author)

Stanford University - Graduate School of Business ( email )

Graduate School of Business
518 Memorial Way
Stanford, CA 94305-5015
United States
650-725-6159 (Phone)

Brian Tayan

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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