Limiting the Power of Superstar CEOs

Document Type

Article

Publication Title

Berkeley Business Law Journal

Journal Abbreviation

Berkeley Bus. L.J.

Abstract

Innovator. Brilliant. Narcissist. Many words have been used to describe Elon Musk. To his devoted fans, he is a visionary, driving the world forward, idolized as the real-life Marvel character Tony Stark. To his critics, he is an unstable egotistical lunatic and needs to be reined in. Love or hate him, there is no doubt that Musk demands attention. In recent years, a conspicuous trend has emerged wherein “superstar” CEOs, like Musk, have ascended to positions of profound influence and power. These superstar CEOs bring significant benefits to their companies. But their prominence often raises concerns about the concentration of power and potential lack of accountability. Too often, superstar CEOs threaten corporate governance by unduly influencing directors and their ability to faithfully discharge their fiduciary duties. Restricting their power becomes essential in safeguarding corporate governance. This Article analyzes the danger superstar CEOs pose to the integrity of corporate governance and the pressing need to devise methods to limit their power. This is further exemplified by Elon Musk, who serves as a vivid illustration of a superstar CEO’s ability to escape personal liability. Central to this discourse is examining how Directors and Officers (D&O) insurance preserves the essential tenets of the fiduciary duties. However, the exploitation of D&O insurance can hinder directors and officers from realistically meet their fiduciary duties. Ultimately, this Article advocates for expanding state corporate laws to require the use of independent and disinterested insurers, prohibiting directors and officers from personally insuring the companies they serve.

First Page

285

Last Page

326

Publication Date

2024

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