A news report that Tesla’s board of directors began efforts to find a replacement for CEO Elon Musk has placed the auto maker in the spotlight once again. Although Tesla chair Robyn Denholm immediately blasted the report as “absolutely false,” it has reignited questions about what the board intends to do about its embattled CEO and the future of the company.
Since rumors about the board of a company looking to replace its CEO don’t tend to happen by accident, it’s safe to bet that industry observers are asking the following questions: Who has the most to gain by forwarding such a story? What type of leader would the Tesla board choose to replace Elon Musk if it had to? Does Tesla have a system in place to prepare internal candidates to step in and run the company as part of its succession planning process? And in light of the company’s negative performance data released in April, perhaps it’s even more important to ask, what is the Tesla board going to do to turn the company around?
Those questions and many more are likely to be asked over the next few weeks by Tesla shareholders and analysts covering the company. Board members at other companies might want to ask themselves—what would you do if your CEO:
- was also the CEO of at least three other major companies while also running your company;
- took on non-business-related political activities that tarnished his reputation and consequently damaged your company’s brand;
- presided over a 30-percent drop in share price since the start of 2025 and a year of losses that has included total revenue dropping by 9 percent, and net income plunging by 71 percent; and/or
- continues to argue that he should still receive an unprecedented $55 billion compensation package that a judge had ruled he should not be paid.
Even if the Tesla board’s decision to back Elon Musk despite the many challenges mentioned is based on their assessment that he is the best CEO to run the company, the board should still consider developing a succession plan to share with shareholders. Now that the company has suffered through a year of significant losses and reputational damage created by this CEO, how much longer will this board be willing to risk its own credibility by backing financial losses and value-destroying behavior from its chief executive?
The board should consider starting its “Tesla Turnaround” story by:
Meeting with the CEO and management about changes needed. A company’s stock price can’t fall 30 percent in four months without the board evaluating what went wrong and developing a plan to stop the slide. Elon Musk has stated that he will devote more time to Tesla, but it’s up to the board to influence how he will spend that extra time, and which areas of the company require the most attention.
Reach out to shareholders, customers and consultants to develop a plan to rejuvenate the Tesla brand. The Tesla brand has been severely damaged by Elon Musk’s involvement with the Department of Government Efficiency. The company must study the impact of campaigns against the company (firebombing of dealerships, protests against Elon Musk, harassment of Tesla car owners, etc.) and devise a strategy to restore Tesla’s image as an innovative luxury brand and leader within its industry. Tough choices that do not benefit Musk may need to be made to restore brand loyalty.
Determine what a real succession plan for the company would look like. Getting the CEO to participate in a transparent and structured process of selecting potential candidates to become the next CEO of Tesla gives shareholders confidence that Musk is putting the company in the best possible position to succeed if he should leave. That will go a long way toward strengthening the relationship of the board with shareholders.
