By Angela N. Aneiros & Karen Woody
The influence that “superstar” CEOs have over a company’s board of directors can be alarming. Among other things, Elon’s ability to skirt personal liability for seemingly obvious breaches of duty has raised concerns within the realm of corporate governance and corporate regulation. While much has been written on Elon’s influence on Tesla’s board of directors, one area of the law that often gets overlooked that has exacerbated Elon’s corporate governance issues is that of directors and officers (D&O) liability insurance. While personally insuring board members seems like a very “Elon” move, it could have broader implications beyond Elon. Are “superstar” CEOs above the law? What are the effects on corporate law? How can we safeguard accountability of fiduciary duties?
This Article narrates the behavior of Elon, as CEO, Chairman, and a director of Tesla, which led to several lawsuits and SEC sanctions. Undoubtably, his behavior and resulting litigation had an impact on Tesla’s D&O insurance rates, leading to Tesla to forgo traditional ways of insuring, resulting in Elon personally insuring the directors. However, this demonstrates the tension that can occur when a conflict arises and a director, as a corporate fiduciary, is required to put the interests of the company above the interest of themselves and the interest of the CEO. This Article explores the importance of D&O insurance and its impact on corporate fiduciary duties by shedding light on the concerns and potential consequences of Tesla-Elon type D&O agreements on corporate governance and corporate law.