Tesla chief Elon Musk and Meta’s Mark Zuckerberg are due to pummel each other in a Las Vegas cage fight at some point in the near future, despite the disapproval of Musk’s mother, Maye and on-off girlfriend Grimes.
But no one can tell these titans of industry to cut it out—not even the boards of their companies. According to corporate governance experts, that’s a big problem for investors and for the firms’ other employees.
“This whole thing is pointless, and frankly, if you’re responsible for overseeing large-scale organizations, one of things you’re supposed to be doing is taking care of yourself,” said Charles Elson, the Edgar S. Woolard Jr. Chair in Corporate Governance at the University of Delaware.
Musk and Zuckerberg are both considered unique and invaluable assets at their respective companies. If either were to suddenly depart—or become incapacitated, or worse—that would leave the business in a tough spot: Investors might dump the stock, the company’s competitive edge could soften, and the organization could lose the vision and leadership style that’s allowed it to recruit top talent, create popular products, and generate media coverage and publicity.
This so-called key person risk is particularly acute at tech companies with founder CEOs. It’s explicitly spelled out in Meta’s and Tesla’s regulatory filings, the latter of which states that “we are highly dependent on the services of Elon Musk, Technoking of Tesla and our Chief Executive Officer.”
Zuckerberg’s “position and importance to Meta” is deemed so vital that the board of directors recently voted to allot $14 million a year to his personal security.
It’s hardly unknown for CEOs to take physical risks—Micron CEO Steve Appleton died when piloting a kit plane in 2012, for example—but cage-fighting is an activity where some degree of injury is to be expected. 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.”
While the Musk vs. Zuckerberg face-off has elicited plenty of condemnation, much of the criticism has centered around the juvenile and debasing antics of the two business leaders, and the negative example it sets in regard to violence. But there’s been surprisingly little public discussion about the potential damage to the companies if one of the two CEOs does not leave the cage in the same condition he went in (at least half a dozen people are known to have died during sanctioned MMA fights).
That may be partly owing to the fact that there’s very little anyone can actually do to deter these two particular CEOs. Tesla and Meta are both publicly traded companies (with a combined market valuation of more than $1.5 trillion), but their CEOs enjoy extraordinary control over their boards.
In Meta’s case, Zuckerberg simply can’t be fired—ever since its 2012 IPO, Facebook has had a dual-class share structure that gives the founder 60% of its voting power. Tesla could technically fire Musk, but the automaker’s supermajority voting rules mean no major changes can happen without two-thirds of shares approving. With Musk himself owning around 13% of those shares, that makes any ouster extremely difficult to achieve. Last year the Tesla board itself tried to do away with the supermajority requirement, but its proposal failed to achieve a supermajority.
“This demonstrates to me the problem with dual-class stock or a controlled company like Tesla—that you can do anything and there’s really very little anyone else can do about it,” said Elson. “That’s the danger of investing in such things…There’s no accountability.”
According to a Morgan Stanley analysis of CEO departures at big banks in 2017 that was cited in a Financial Management news article, organizations that unexpectedly lost a chief executive underperformed the market by 11% over the following 12 months. The article advises companies to mitigate the risk by having solid succession plans in place. If Meta has a designated successor to Zuckerberg, the company has not said who it is. And when Tesla shareholders sought to force the electric-car maker to produce a succession plan at its latest annual meeting, the company defeated the proposal, arguing that publicly identifying a Musk successor would put it at a competitive disadvantage.
Cooler heads could still prevail
Musk and Zuckerberg agreed to their confrontation at the end of June. Musk proposed the fight out of annoyance at Meta’s launch of Threads, a rival to Twitter, the social media platform that Musk owns and recently renamed X. Zuckerberg is the favorite to win, as he’s already an experienced jujitsu fighter.
Musk has also been training in anticipation, but said this week that he was getting an MRI of his neck and upper back and “may require surgery before the fight can happen.” Zuckerberg said he had proposed the date of Aug. 26, but was “not holding [his] breath” for confirmation from his opponent.
On Wednesday, Musk further fueled the notion that he may withdraw by describing as “a good idea too” a proposal from TED chief Chris Anderson for a “cage debate” rather than a fight—though he went on to describe fighting as “a noble sport,” adding: “We also hope, with humility, to express our admiration for those who have fought before for noble causes.”
Like Elson, Columbia Law School’s John Coffee—the school’s Adolf A. Berle Professor of Law—is scornful of the planned cage fight, though he is skeptical that Musk will follow through with it.
“If it happens, it is a lose/lose strategy as they will come out from a hair-pulling match with diminished respect from all,” Coffee said in an email. “They need a respected figure, like Warren Buffett, to tell them that CEOs should not act like children (even when they are).”
Neither Meta nor Tesla responded to requests for comment.
