Corporate Populism: Musk's Challenge to the Rule of Law and Equity

Abstract

The success of Elon Musk and his companies defy received understanding. Tesla stock creeps upwards even as it suffers the kind of setbacks that would amount to serious trauma in any other company. Musk and his boards violate their fiduciary duties routinely - and their shareholders continue thanking them by approving eye-popping compensation plans and buying up bigger stakes. Notwithstanding Musk's minority share of the company, the Tesla board acts more like a mouthpiece than the apex body of corporate government. Lacking any vocabulary to explain the phenomenon, scholars and journalists use words like "cult" and "charisma," "celebrity" and "superstar." Some point to the fundamental problem of oligarchy: oligarchs get what they want, law be-damned. To be a billionaire is to be free of regulators, courts, and even the inconvenience of negative public opinion. Musk is one of the very richest people in the world, an oligarch. Rather than studying Musk, why not study the root of the problem: capitalism's corruption of democracy? Yet, why is Musk so rich? Why is he so very rich? His wealth, primarily based upon his equity stake in the companies he stewards, seems untethered from business fundamentals. Meanwhile, many corporate law scholars shrug their shoulders: so long as the shareholders are happy and continue to make money, why have the Delaware courts, tasked to protect shareholders, been so hostile to him? Why bother looking any deeper?

This paper suggests that we should indeed look deeper into the guts of Musk's corporate governance. "Giving the people what they want" is not an unqualifiedly good thing. In fact, political theory and political science have long studied popular power and the risk it poses not only to the rule of law, but also to liberal constitutional democracy itself. Namely, I argue that theories of populism can provide a lot traction for those seeking to understand what is going on at Twitter and Tesla, at SpaceX and Neuralink. Once one sees Musk as more Trump than Dimon, more Bolsonaro than Immelt, more Orban than Eiger, then one gains more clarity on the rhetoric, the tactics, and the performance of Elon Musk than most corporate law scholarship can provide.

The argument proceeds in seven Parts. Following this introduction, it defines in Part II the populist disease. It summarizes three different theories of populism offered by political theory and political science: populism as a rhetoric and discourse; populism as a political strategy deployed by charismatic demagogues, and populism as a cultural performance. Part III sets forth the populist prognosis: it explains the ruin that populist leaders will work on the rule of law and democracy itself. After establishing this theoretical background, Part IV explains why populist logic is applicable to corporate governance. While liberal constitutional states and corporations are different in many important ways, they share characteristics that are susceptible to populist movements. Part V offers a diagnosis of the peculiar symptoms suffered by Musk's companies by applying populist theory to Twitter and Tesla. It shows that Musk and his followers display the rhetoric, the strategy, and the cultural performance usually associated with populist political movements. Part VI describes the consequences of this disease on corporate governance, showing how the erosion of the rule of law and equity within Musk's boardrooms comes straight out of the populist playbook. Part VII concludes with a comment and a warning. It argues that, when understood in light of corporate populism, the recent amendments to Delaware's General Corporation Law facilitate the corporate backsliding effected by corporate populism. And populism, whether corporate or otherwise, has no internal controls. It will not stop its march to colonize every system of governance. It must, instead, be stopped.

Keywords: corporate governance, populism, democratic backsliding, Delaware Law, 8 Del. C. section 144, Elon Musk, Authoritarianism