Is a question I get asked a lot, especially after Musk offered an enthusiastic gesture that absolutely, positively, in no way resembled a Nazi salute pleasedon’tsueme. 

And the answer is – no. 

Even under the law of Delaware-before-SB-21 (and before Texas’s “hold my beer” alternative, which would among other things, prevent not only shareholders, but the corporation’s own board, unprompted, from suing a director or officer in the right of the corporation for anything other than fraud, intentional misconduct, ultra vires acts, or knowing violations of law), this cannot be the basis for a claim by Tesla’s shareholders against Elon Musk.

As Tesla’s CEO and a member of the board, Elon Musk owes Tesla a duty of care, and a duty of loyalty.  That means he cannot run Tesla with gross negligence – which, under Delaware law (let’s assume Texas law is no more strict), would be defined as akin to recklessness – and he cannot be disloyal, which means acting under a conflict of interest, intentionally trying to harm the company, or intentionally failing to take action to benefit Tesla when he knows he has a duty to take such action.

Let’s start with loyalty.  Whatever his motives are, he is almost certainly not intentionally trying to harm Tesla.  He may be blinded to the effects his actions are having on the brand, but he hasn’t set out to wreck it, nor is he disregarding any specific action he knows needs to be taken on Tesla’s behalf.  There are no reports, for example, that he’s letting Tesla plants idle while they wait for him to make a decision, nothing like that.

And whatever else he’s doing – even his work for DOGE which he is totally not doing it’s all Amy Gleason shut up – there is no evidence that his governmental work is causing him to deal with Tesla as a counterparty.  He is not, for example, assuming a governmental role while bargaining with the government on Tesla’s behalf (that would be what’s he’s doing at SpaceX.) If anything, his proximity to government is giving Tesla certain advantages, like an infomercial on the White House lawn.

So that leaves the duty of care.  Which might appear to be in play, to the extent Musk is ignoring Tesla in favor of his other interests.  But under Delaware law, at least, inaction is gauged – again – by conscious disregard of one’s duties.

In other words, neglect only rises to the level of a fiduciary breach when the corporate manager intentionally refuses to take actions he knows must be taken.

A shareholder couldn’t even sue on the grounds that Tesla has made false representations about Musk’s role with the company, because here’s the company’s most recent 10-K:

We are highly dependent on the services of Elon Musk, Technoking of Tesla and our Chief Executive Officer. Although Mr. Musk spends significant time with Tesla and is highly active in our management, he does not devote his full time and attention to Tesla. For example: Mr. Musk also currently holds management positions at Space Exploration Technologies Corp., X Corp., X.AI Corp., Neuralink Corp. and The Boring Company, and is involved in other ventures and with the Department of Government Efficiency….

if our ESG practices do not meet investor or other industry stakeholder expectations, which continue to evolve, we may incur additional costs and our brand, ability to attract and retain qualified employees and business may be harmed. Compliance with any current or future legal requirements on these topics may result in additional costs or risks to us, including harm to our reputation, reduction in customer demand, and increased legal and operational risks.

Which brings us to the broader issue. Whether you consider Musk’s conduct in terms of care, or in terms of loyalty, ultimately, it’s up to the board of directors to oversee his behavior.  As a formal matter, they’re the ones who “hired” him as CEO and who retain him in that role; they’re the ones who, in the first instance, have a responsibility to rein him in if he is not performing adequately.  Which is why – even if Musk had violated his duties of care or loyalty – any shareholder bringing a lawsuit first would have to demonstrate that the board is incapable of performing its own functions.

And, I mean, yeah, it’s no secret what the board’s ties are to Musk, but I find it very difficult to believe any court would go so far as to hold they were incapable of overseeing him as CEO.  After all, their stock compensation is tied to his performance as well.  Even the Tornetta decision, holding that the board was captured by Musk, only applied to the pay award – not for all things forever and for all time.

If that sounds like shareholders have a lot of hurdles to overcome before bringing a lawsuit, correct!  Because the system is predicated on the idea that lawsuits are a last resort for disciplining recalcitrant corporate managers, not a first resort.  The first resort is supposed to be the market.  Corporate CEOs (and boards) are paid with stock, so that they will care if stock prices drop.  And even if they don’t care, public shareholders will – and they’ll respond to stock drops by voting in new directors who will do a better job. The system just isn’t built to handle a scenario where a CEO, board, and public shareholders all respond with a collective shrug when a stock loses nearly half its value within the space of a few months.

And that’s not really a problem.  After all, if the stock drop was due to, I dunno, Tesla philanthropy, I probably wouldn’t be having this conversation with people.  The reason the question comes up, usually, is because the person doing the asking believes Elon Musk is causing harm in the world, and so floats the possibility that he’s violating shareholder rights as a mechanism to get him to stop.

But if you were genuinely concerned for the plight of Tesla shareholders, you wouldn’t recommend a lawsuit.  What could that possibly get you?  There’s no realistic chance of Musk, like, paying financial damages to make up for the price drop, so the only remedy would be some kind of judicial order that he focus more on Tesla, or that he be fired from Tesla entirely.  But Tesla shareholders don’t want his firing, nor should they – Tesla’s stock price is still well above what it would be for an ordinary car company.  And if Musk were to focus more on Tesla, that might be great in theory, but it’s not a command that a court can realistically enforce.

So that’s my point.  I’m not saying corporate law is irrelevant to societal outcomes – I think it does have a role to play, actually, an important role – but not quite this directly.  The formal duties that a corporate officer owes to a company are not going to be what causes Elon Musk to step back from DOGE.