Tesla’s governance nightmare

Tesla’s governance nightmare continues this week as its share price returns to the sluggish levels it experienced before the US election, which gave it a temporary bump. 

This is a complex scenario to get to the bottom of, considering how infamously Tesla is attached to Elon Musk and how much influence he now has over the US government and economic policy – in essence, a significant number of things that have little to do with Tesla at all. 

But beneath that, there is still a governance story to analyse. So, let’s analyse it:

Since January 2025, Tesla’s share price has been in freefall. It has lost over half its value from a December 2024 peak, plunging from around $480 per share to roughly $222 by early March 2025—wiping out over $800 billion in market capitalisation. 

It coincides with two significant developments:

• CEO Elon Musk’s new role as head of the Department of Government Efficiency (DOGE), working for the US Federal Government
• Tesla’s increased global competition. It has been a world leader in electric vehicles for years, but now, other companies are challenging its dominance.

It’s easy to hear the name Elon Musk and immediately start thinking about DOGE, the US government or his influence on world affairs from within the Donald Trump White House. 

However, this article focuses on the governance situation at Tesla specifically, not politics. 

From this vantage point, the real issue isn’t that Musk is taking on new responsibilities elsewhere; it’s how he is (or isn’t) handling Tesla while doing so. The company faces plummeting sales, eroding consumer confidence, and growing stakeholder dissatisfaction. Yet, Musk’s response has been erratic at best and negligent at worst.

Musk has always been outspoken, but in the last few years, he has gravitated far more towards far-right politics and found a home in the warm embrace of the MAGA movement in the United States. Tesla is in a bind because of this; its consumer base – ever environmentally conscious – traditionally aligns with the opposite end of the political spectrum.

It’s Musk’s political decision to take on the roles he wants. Still, whether he likes it or not, he has tied Tesla’s reputation to his own, meaning stakeholders will judge the company based on his actions while working for Donald Trump. 

The most crucial fact is that Tesla sales are dropping because of this. You don’t need to look further than Germany for an example of this in action. Here, Elon Musk has thrown his support behind the right-wing AfD party, alienating a large number of potential German customers who fear AfD is the closest thing to fascism they have seen in years. CNN reports that Tesla sales are down 73% in March 2025 compared to one year earlier. 

Musk’s governance failure here is that he is still supposed to act in the company’s best interests while he remains the leader. If his current political position compromises trust, he should either re-think his politics or distance himself from Tesla’s operations, but he has shown no sign of doing either.

Mainly because women and minorities are underrepresented in the top ranks of U.S. firms, there is very little racial and gender diversity in corporate America.

Investors want to see more diverse boards, boards that represent the communities and customers they serve. Many companies currently don’t reveal the gender and race, or ethnicity of directors.

Tesla’s sales woes are about more than just Musk’s politics:

• Musk hyped up the company’s cybertruck, but when it finally hit the market, it arrived late, overpriced, and riddled with production issues. Meanwhile, competitors like Rivian and Ford have surged ahead.
• Competitors are now caught up in the electric vehicle game, giving customers cheaper alternatives to Tesla while still providing them with the same luxuries.
• Tesla is having serious trouble in the Chinese market, where other brands like BYD are eating into the company’s market share, offering better value and fewer controversies.

Despite all this, Musk’s response has been minimal, and that’s the governance flaw. 

When sales are down, when the pressure is up, the answer is always a thorough analysis of strategy and a revamp if necessary. Get rid of what’s not working and explore new avenues for success. 

Musk is simply not doing this. There’s no clear turnaround plan, no major product announcements to reinvigorate demand, and no strategy to reassure investors, some of whom are questioning his leadership outright.

Tesla is still firmly built around Elon Musk, and Musk favours the one-man-band approach to governance. 

He demonstrated this at X too. Independent, inquisitive and challenging boards are one of his biggest pet peeves. Instead, he prefers governance colleagues to be more “rubber-stamp” in their behaviour, consistently agreeing with his decisions and falling in line instead of challenging anything.

While this suits him, it’s not exactly an indicator of good governance, especially now that Tesla is out of rapid growth mode and facing serious business challenges.

There are two main possible explanations:

1. He believes himself to be above governance norms and bulletproof regarding failure. Even if things look bad for Tesla now, he may be convinced the company will continue growing under his leadership. “It worked before; it’ll work now.”
2. He’s more focused on his government role – Running DOGE and maintaining a close relationship with Trump might be his new priority, leaving Tesla as an afterthought. This – by the way – is a huge red flag in governance. No stakeholder will like the idea that the person they trust to be the leader is working harder elsewhere.

There’s a lot to talk about with Elon Musk, who is now one of the most influential people in global politics, let alone economics. 

However, behind all the debate and divisiveness, he also has several things to answer for at the company that he built from the ground up over the last decade: essential governance 101 issues that will decide the future of the business. 

What happens next? That’s the big question.

Tesla’s governance nightmare: The Corporate Governance Institute