When Elon Musk stepped into a quasi-governmental role—leading the so-called “Department of Government Efficiency” (DOGE), questions quickly arose: did the boards of Tesla and SpaceX sanction this move? And if his actions sent stocks tumbling, are those boards accountable for their alleged recklessness?
- Board Approval—or Passive Endorsement?
First: there’s no evidence that either board formally approved Musk’s government role. His position, as a special government employee in the Trump administration’s DOGE (created by executive order in early 2025), appears to have been self-initiated, not board sanctioned.
What we do know: Tesla’s board recently approved a $29 billion restricted stock award for Musk, recused from the vote by Musk himself and his brother, framing it as essential to retaining him amid legal and political turbulence. This shows a board inclined to protect their CEO’s influence, if not formally endorse his political pursuits.
- What About Stock Prices and Investor Fallout?
Musk’s government entanglement sparked immediate investor concern. A Senate subcommittee report estimates $2.37 billion in potential legal exposure for Musk and his companies, highlighting severe conflicts of interest and risks arising from DOGE’s actions.
Additionally, as Tesla’s political alignment deepened, stock prices suffered. Critics say the company’s conservative associations alienated parts of its customer base and diminished EV sales. The result? A significant long-term stock decline.
- Board Liability: Are They on the Hook?
Legally, boards owe a fiduciary duty to shareholders, namely to act in the company’s best interest. Musk’s previous outrageous compensation deal was overturned, with the Delaware Chancery Court ruling that the board was “beholden to Musk” and lacked independence.
In that case, Tesla’s non-executive directors were ordered to return nearly $1 billion in excess compensation, highlighting serious governance failures.
In current circumstances, shareholders might point to:
- Board inaction in the face of Musk’s political foray
- Failing to assess reputational and regulatory risks, especially given his influence over agencies that oversee Tesla and SpaceX
There’s already chatter online about exploring class-action suits for fiduciary breach: “I can’t imagine getting away with what Elon has been able to do without serious consequences, including financial consequences… It seems they should all have financial accountability.” However, as of now, no formal lawsuit has been brought against the boards regarding Musk’s government involvement.
- What Were They Thinking?
From a governance lens, the board might have prioritized retention and continuity—particularly in areas like AI, robotics, and overall strategic direction—over political optics. Supporting Musk personally and financially appears to have outweighed broader risk concerns, yet this strategy may have backfired.
By implicitly tolerating or enabling Musk’s political role, the board exposed Tesla (and potentially SpaceX) to investor distrust, legal scrutiny, and regulatory backlash, all threats to long-term shareholder value.
Bottom Line
Neither board officially approved Musk entering government, but they offered strong financial backing during subsequent legal and political turbulence.
- The fallout: plunging stock prices, regulatory scrutiny, and escalating legal risk raise serious governance questions.
- While no lawsuits have yet been filed over fiduciary negligence in this context, the precedent of previous legal action (e.g., compensation clawbacks) means boards may yet face accountability for enabling such reckless corporate behavior.
At Chilmark Advisors, our reverse search philosophy reminds us how critical board composition and independence truly are—especially when stakes involve public trust, high-profile leadership, and the convergence of public and private influence.