11/17/22 – Issue 7.94 – Your weekly news on all things board. 

Tesla, Twitter and Space-X CEO Musk is in the news again. And again. And again. While defending the Tesla pay package that made him the world’s richest man, Musk argued that he had nothing to do with the board’s decision and approval of the $50 billion option grant. The suit has been brought by an investor who alleges that the board did not have sufficient independence from Musk to arrive at such a decision independently. While on the stand, Musk and a Tesla director suggested that Musk is looking to a future in which he is not CEO of Tesla, nor of newly acquired Twitter. Musk made another round of headlines by sending a memo to Twitter staff, suggesting that anyone not enthusiastic about “working long hours at high intensity” should sign up for a severance package instead. In other news, Amazon is the latest to announce mass layoffs, while an activist investor presses Alphabet to pare back Waymo staff. Savvy boards are focused on the SEC’s new cybersecurity disclosure requirements and avoiding the very real costs of missing the mark on ESG.

WE ARE GRATEFUL! Everyone at Boardspan wishes you a happy Thanksgiving holiday. (There will be no newsletter next Thursday, as our team takes time to enjoy the holiday.)

In the Spotlight

Musk Defends His Board-Approved Tesla Comp Package In Court

“Elon Musk testified on Wednesday that he was not involved in the discussions among Tesla board members about a 2018 pay package that granted him billions of dollars in stock options, helping to make him the world’s richest person. Speaking in a courtroom in Wilmington, Del., Mr. Musk pushed back against accusations in a shareholder lawsuit that the electric car company’s board was stacked with friends and other people close to him who did his bidding. ‘I was completely focused’ on managing Tesla, he said. The case, in which Mr. Musk testified for less than three hours, centers on a compensation package that awarded Mr. Musk stock options that gave him the right to acquire nearly $50 billion in Tesla shares if the company met certain revenue, profit and share price goals. At the time, the deal was one of the largest of its kind, and it has become a template used by many other corporate boards to reward chief executives.” NEW YORK TIMES

Tesla Director Says Musk Has Put A CEO Succession Plan In Place
“Elon Musk recently floated the possibility of someone succeeding him as Tesla Inc. chief executive, a board member said Wednesday while testifying in a trial over the CEO’s pay package at the electric-vehicle maker. The board member, James Murdoch, said Mr. Musk in recent months identified a potential successor who could serve as CEO of Tesla. The comment by Mr. Murdoch is a sign Mr. Musk may be thinking about Tesla’s next chapter. As recently as last year, Mr. Musk said Tesla didn’t have a succession plan.” WALL STREET JOURNAL

… And Musk Says He Won’t Stay In CEO Role at Twitter
“Billionaire Elon Musk, who just took over as the chief executive at Twitter after buying the company, said he does not want to be the CEO of any company. Musk took the witness stand Wednesday in a Delaware court to defend himself in a shareholder lawsuit challenging a compensation package he was awarded by Tesla’s board of directors that is potentially worth more than $55 billion. While testifying, Musk said ‘I expect to reduce my time at Twitter and find somebody else to run Twitter over time.” AP NEWS

In Note to Twitter Staff, Musk Invites Only the “Hardcore” to Stay At the Company
“Elon Musk issued an ultimatum to Twitter employees Wednesday morning: Commit to a new ‘hardcore’ Twitter or leave the company with severance pay. Twitter is shifting to an engineer-driven operation one that ‘will need to be extremely hardcore’ going forward, according to the midnight email, which was obtained by The Washington Post. Employees were asked to click an icon and respond by Thursday if they wanted to stay. ‘This will mean working long hours at high intensity,’ he said. ‘Only exceptional performance will constitute a passing grade.’” THE WASHINGTON POST

Across the Board

The Latest Layoffs: Amazon to Dismiss 10,000 Corporate Employees…

“In a dramatic turnaround from its constant expansion of the past decade, Amazon began laying off corporate employees Tuesday, becoming the latest of the tech giants to slash its workforce in an increasingly uncertain economic climate…The e-commerce giant is expected to cut about 10,000 workers, or 3 percent of its corporate workforce... The cuts are expected to be the e-commerce giant’s largest round of layoffs in its history, marking a big turnaround for a company that has hired aggressively over the past decade. Amazon is expected to continue hiring in its warehouses, where it is adding staff to support its busy holiday season…Meta cut 11,000 jobs, or 13 percent of its workforce, last week. Ride-hailing service Lyft also shed 13 percent of its staff. Financial technology firm Stripe and real estate marketplace Zillow have also announced layoffs since October.” THE WASHINGTON POST

… As Activist Investor Urges Alphabet to Cut Waymo Workforce

“Activist investor TCI Fund Management has called on Alphabet Inc to cut costs by lowering its headcount and reduce losses in its self-driving unit Waymo, saying the Google parent needs to adjust to an era of slower growth…Many tech companies including Meta are lately making deep cuts to their employee base as part of its restructuring efforts to navigate a potential downturn in the economy, after years of rapid hiring... Alphabet, which is also struggling with advertisers cutting back on spending, said in late October that it plans to cut hiring by more than half. ‘Cost discipline is now required as revenue growth is slowing. Cost growth above revenue growth is a sign of poor financial discipline,’ the fund said in the letter to Alphabet's management and board.” REUTERS

Get Ready for New Cybersecurity Oversight Rules

"… Boards have a particularly important role to ensure appropriate management of cyber risk as part of their fiduciary and oversight role. As cyber threats increase and companies worldwide bolster their cybersecurity budgets, the regulatory community, including the SEC, is advancing new requirements companies will need to know about as they reinforce their cyber strategy... The SEC will soon require companies to disclose their cybersecurity governance capabilities, including the board’s oversight of cyber risk, a description of management’s role in assessing and managing cyber risks, the relevant expertise of such management, and management’s role in implementing the registrant’s cybersecurity policies, procedures, and strategies.” HARVARD BUSINESS REVIEW

The Real Costs of Overlooking ESG Concerns
“Until recently, many investors considered environmental, social and governance (ESG) factors too expensive to prioritize. The belief was that focusing on these factors would make it harder to maximize returns…Since the UNPRI report was unveiled at the NYSE in 2006, a series of catastrophic events have driven the momentum of ESG investing. The BP Deepwater Horizon oil spill destroyed marine and wildlife habitats, costing BP approximately $65 billion in penalties and settlements, a figure that does not include reputational costs…Social impacts also pose risks. In 2020, a report linked 83 multinational companies, including Apple, Nike and Samsung, to using forced labor from China’s repressed Uyghurs. These brands all paid steep reputational costs as a result…Successful ESG programs start at the top, in the boardroom. If leaders prioritize ESG objectives, the rest of the workforce will follow. Conversely, if leaders don’t take ESG-related goals seriously, their sustainability efforts will amount to little more than ‘greenwashing,’ a practice that can carry its own negative risks.” FORBES

From the Boardspan Library

The Human Capital Management Mandate for Boards

"For years, companies have been moving to treat employees as an asset, not an expense… human capital management (HCM) is now a front-and-center issue. With long-term success increasingly depending on attracting, retaining and engaging talented people, HCM has become a concern not just for senior executives, but also for the board of directors…Succession planning was an early area embraced by boards, as they realized the exposure the company faced when it depended on a single CEO or group of executives...Most companies have established CEO succession as a full board responsibility, but the compensation committee might assume succession planning for other executives. Likewise, full boards might oversee diversity and inclusion outcomes but delegate oversight of talent planning for diversity, employee engagement, pay equity and leadership development” DIRECTORS AND BOARDS via BOARDSPAN

Seat at the Table 

• Cruise ship company Carnival Corporation welcomes to its board Sara Mathew, former Chair, President and CEO of commercial insights company Dun & Bradstreet Corp
• Professional services firm JLL elects to its board Moses Ojeisekhoba, CEO of reinsurance company Swiss Re
• Schnitzer Steel Industries appoints to its board Gregory Friedman, CFO of plastics recycling company Mura Technology
• Cloud-based platform Encompass Technologies adds to its board Ray Guerin, former Chairman and CEO of Reyes Beverage Group
• Ralph Lauren appoints to its board Wei Zhang, former Senior Advisor and President of film company Alibaba Pictures Group
• Mobile healthcare company DocGo welcomes to its board Vina Leite, Chief People Officer at GoodRx
• Biotechnology company Biogen elects to its board Christopher Viehbacher, former CEO of global healthcare company Sanofi

About Boardspan
Boardspan is the leading provider of digital governance solutions for boards across all sectors. Our cloud-based assessments, benchmarking analytics and governance education programs complement our board search and advisory services to deliver a holistic approach to governance. Boards of all sizes and stages rely on Boardspan to deliver analytics, insights and outcomes that improve their effectiveness and performance. Clients include KKR, The Kellogg Foundation, Ingersoll Rand, Farfetch, McAfee, Beyond Meat, Box, e.l.f. Beauty, Satellite Healthcare and the U.S. Olympic & Paralympic Committee.