Key Points:
- SpaceX plans “controlled company status” after its IPO.
- Elon Musk will retain significant control over the board.
- This means no majority of independent directors are required.
- Musk’s past history with Tesla’s board raises concerns for some.
SpaceX is telling potential investors that its board will not need a majority of independent directors. This information, from an excerpt of its IPO filing seen , shows how founder Elon Musk plans to keep control of the rocket and artificial intelligence company.
Unlike most public companies, SpaceX stated it will keep “controlled company status” after its $1.75 trillion initial public offering (IPO), which is expected this summer. This status means the company won’t need a board where most directors are independent, nor will it require independent committees for compensation and nominations, according to the filing excerpt. The only requirement is an audit committee made up entirely of independent directors.
A 2024 study by the National Association of Corporate Directors found that only 3% to 4% of companies in the Russell 3000 index had boards where company insiders held the majority.
SpaceX could still choose to add independent directors, even with this status. For example, Meta Platforms, another tech company, also has “controlled company” status due to its CEO’s majority voting power under Nasdaq rules. However, Meta still has mostly independent directors on its board.
This news comes after Reuters reported that Musk and a small group of insiders hold “super-voting shares,” which would give them more voting power than other investors.
Having a board that largely agrees with him is not new for Musk. While his electric car company, Tesla, lists most of its nine directors as independent by Nasdaq standards, many critics have worried that the board—which includes Musk’s brother Kimbal and former Tesla Chief Technology Officer JB Straubel—is too close to the CEO.
These concerns have contributed to ongoing complaints at Tesla, such as a judge’s 2024 decision to cancel Musk’s $56 billion pay package. The judge argued that the board lacked independence when it approved the pay in 2018. Musk later won a ruling that restored his pay in December.
On the other hand, having “controlled company status” could give SpaceX more flexibility in setting pay arrangements, according to David Larcker, a Stanford University professor who studies corporate governance.
SpaceX’s board will oversee potentially very large compensation for Musk, according to other parts of the document. These outline market capitalization goals of up to $7.5 trillion for restricted stock payments to become fully available.
