Is it time for corporate board members to consider placing limitations on the outside business and political activities of CEOs? Considering the negative impact Tesla CEO Elon Musk’s political activity has had on the company’s stock price, it might be a topic for boardrooms to discuss.
Since Musk was appointed as a special government employee for the Trump administration, he has drawn ire from millions of Americans because of his activities associated with the Department of Government Efficiency (DOGE). People across the globe have identified Musk as the primary person responsible for the way the Trump administration has eliminated jobs and cut aid programs, sparking protests against Musk at Tesla dealerships, the destruction of Tesla vehicles, harassment of Tesla car owners and a movement to get investors to sell Tesla stock in protest. The anger towards Musk has apparently affected Tesla car sales. Tesla sales fell by 13 percent in the first quarter of 2025, and there is fear that sales may continue to lag as the Trump administration’s new tariffs go into effect this month.
Corporate directors are generally very careful not to be too open with their political views—especially regarding controversial subjects, such as abortion or gun control. Should CEOs be just as careful? Musk has made public comments calling Social Security a “ponzi scheme” which angered many Americans and soiled his reputation. Now some fear his damaged reputation is harming Tesla.
Many corporate boards place restrictions on the activities of board members—limiting how many outside boards they may serve on, for example. As investors examine what happens as Elon Musk’s non-Tesla related activities have potential impacts on the car maker’s business, corporate board members may want to ask themselves if their current CEO might present their company with risks similar to what Tesla is facing today. In fact, corporate boards might want to ask:
Should we consider restricting the public political activities of the CEO and named officers? If there isn’t a policy regarding this matter already in place, boards might want to implement one. As the country becomes more politically divided, there will be increasing pressure to bend to the political will of people or groups outside of the company. While it is a very delicate matter that could involve the CEO’s right to free speech, there is risk to investors who may be harmed by public support of controversial issues. Boards need to consider those risks and determine how they will explain the CEO’s actions to investors if the company is negatively affected.
Should there be restrictions on the CEO’s activities involving other businesses, including businesses he or she may own? At what point do outside interests distract the CEO from focusing on their primary business? Corporate board members are often restricted from serving on “too many” boards because they may become overloaded and become less effective than they otherwise could be. Should CEOs be similarly restricted? Elon Musk heads up many businesses other than Tesla, including SpaceX, Neuralink and xAI. Could his workload running those other companies have also contributed to the 13 percent drop in Tesla sales in the first quarter? While no one wants to stifle innovation, the board must weigh the potential impact its CEO running multiple companies or sitting on multiple outside boards might have on the company’s bottom line.
Are there risks that involve our CEO’s interests or personality that might impact the company in the future? Generally, this issue is dealt with prior to a CEO’s appointment, but due to the uncertainty of political twists and turns, boards may need to consider revisiting this sensitive issue from time to time as political and social environments change. While it may be hard to admit, certain leaders’ reputations may help or hurt a company at different points in time. Directors should just be aware that this may be an unfortunate possibility that may need to be discussed.
