Founder supremacy is eroding the discipline of corporate governance

By Gautam Mukunda

 

Elon Musk, who already owns about 42 per cent of SpaceX, will have 85 per cent voting control following the company’s initial public offering (IPO). Documents filed with the Securities and Exchange Commission lay out some rare terms.

 

Mr Musk will simultaneously be chairman of the board, chief executive officer and chief technology officer. He appoints most of the board’s directors. He cannot be fired. Because SpaceX filed for “controlled company” status under Nasdaq rules, it will even be exempt from the requirement that a majority of its directors be independent. Public investors waive their rights to jury trials and class actions.

 

Although the world’s richest man with a fortune estimated by Bloomberg at more than $725 billion is officially the “Technoking” of Tesla, his title at SpaceX might as well be “God Emperor.” But he’s far from the only CEO throwing traditional corporate governance out with the garbage. Such an approach ignores centuries of hard-won wisdom on what really helps leaders succeed, even ones as mercurial as Mr Musk.

 

SpaceX isn’t the first tech company to try to give its leader a completely free hand. Google’s 2004 IPO brought dual-class shares into the tech mainstream, with a founders’ letter arguing (correctly) that capital markets had become too short-term in its views  and the company’s founders needed more voting control. Companies like Meta, Snap, Roblox and Pinterest followed Google’s example. The structure has spread dramatically. In 2025, 41 per cent of all US IPOs and almost half of tech IPOs were dual class, both all-time highs and up from less than 2 per cent in 1980.

 

But SpaceX has gone much further, enabled by the institutions that are supposed to push back and protect all shareholders. Texas changed its laws to favour management and lure companies like SpaceX away from Delaware. To compete for the SpaceX listing, Nasdaq cut the seasoning period for

 

index inclusion from roughly three months to 15 days for companies in the top 40 of the Nasdaq 100 (so, of potential IPO candidates, SpaceX, OpenAI, and Anthropic), and restructured the requirement that at least 10 per cent of a company’s shares be publicly tradeable by weighting low-float stocks at three times their free float, forcing index funds to pour money into the company’s stock despite a relatively small number of available shares. The

 

institutions designed to constrain founders have abandoned their job to curry favour with this one.

 

We constrain leaders because we’ve learned that it works. The motto of Britain’s fabled Royal Society is Nullius in verba: Take nobody’s word for it. The foundation of science is that ideas must be tested, not accepted on faith, no matter who proposes them. That stricture even applies to the greatest scientists who ever lived.

 

Albert Einstein spent decades of his life rejecting quantum mechanics. Other scientists proved him wrong and modern physics, including the foundations of quantum computing, is built on those debates.

 

Legendary Intel CEO Andy Grove applied the same approach to management via constructive confrontation. Problems had to be confronted directly and quickly, focused on the idea rather than the person, never left to fester. Grove realised that disagreement doesn’t make leaders weaker; it makes them better.

 

To get another perspective, I called former Ford Motor Co CEO Alan Mulally, in my opinion the finest of his generation, and asked him how his Working Together system encouraged speaking up, even to him. He told me, “I would say, ‘If I did something that didn’t look like I was following Working Together, I’d appreciate your thoughts.” Two of the best CEOs America has ever produced know that pushback doesn’t make leaders weaker. It makes them better.

 

Companies that reject that insight pay for their mistake. Take Meta’s Reality Labs. CEO Mark Zuckerberg’s voting control of Meta is, like Mr Musk’s at SpaceX, the product of a dual-class structure. He reoriented his company around the Metaverse with such enthusiasm he renamed Facebook Inc as Meta Platforms Inc. Nevertheless, cumulative operating losses through the end of 2025 exceeded $83 billion. Someday maybe we’ll all hang out in the Metaverse. But for now, the vision far outstrips the technology. When you schedule a major announcement to proclaim that after spending billions of dollars your avatars now have legs, you’ve misjudged the situation. A CEO who had to justify his choices might have had someone point that out before the checks were written.

 

It’s not an accident that Apple’s Steve Jobs, maybe the greatest of all high-tech founders and CEOs, had no need to shelter behind bespoke extra protections. Apple has always been one share, one vote. When Jobs was pushed out by the board, it had good reason to do so. He spent the next 12 years learning. Getting fired from Apple was the best thing that could have happened to him. That’s not my opinion; that’s what Jobs told the Stanford University graduating class of 2005. The Jobs who returned in 1997 could partner with a board and listen to Jony Ive and Tim Cook (sometimes). The results speak for themselves.

 

The leading scholar on dual-class structure, Harvard’s Lucian Bebchuk, has shown that even if they provide an initial advantage, it fades over time. Psychology can explain why. Power changes the people who hold it. The powerful are less willing to listen to others and more willing to manipulate. Stripping away constraints on CEOs exacerbates power’s worst tendencies, when good corporate governance would be seeking to counteract them. The fact that Mr Musk has been successful running SpaceX isn’t a guarantee that he’ll continue to succeed, especially if any guardrails around him are removed.

 

SpaceX’s structure takes a CEO who is already unfiltered and completely unleashes him. It virtually guarantees that we’ll get the worst version of its leader. Other companies seeking to emulate Mr Musk are sure to adopt similar structures, and the result will be the same. Today’s CEOs are understandably tempted by the prospect of ignoring the whims of financial markets. Their diagnosis that Wall Street’s short-termism is a problem is correct. Becoming an absolute monarch is like giving yourself cancer to cure heart disease. You’ve fixed a real problem by giving yourself a much worse one.