Only Elon Musk can fire himself at SpaceX

SpaceX’s filing states that Musk “can only be removed from the Board of Directors or these positions by vote of the group of shareholders holding class B shares”. This is a type of stock with 10 times more voting rights than normal that Musk will hold after SpaceX makes its IPO, making the dismissal essentially dependent on his own vote.

“If he holds a large amount of Class B shares for a long time, he can continue to control the election and removal of a majority of our Board of Directors,” the filing said.

SpaceX used a dual-class stock structure when doing its IPO. This is a common model when listing technology companies led by founders. This gives them and the first shareholders greater control than public shareholders. However, even with this structure, the Board of Directors usually still has the formal power to replace the CEO, although the founder can exert influence through voting rights.

At SpaceX, current terms give Musk the power to veto any effort to remove him from office. This is a level of control that corporate governance experts say is far beyond common practice.

“This regulation is not common. Normally, the dismissal of the CEO is a decision of the Board of Directors, while the controlling shareholder will rely on his or her power to change the board,” said Lucian Bebchuk – Professor at Harvard Law School.

SpaceX has also warned potential investors that this structure “will limit or eliminate your ability to influence corporate matters and elect the Board of Directors.”

The dual-class stock structure has been very popular with founder-led technology companies doing IPOs in recent years. Facebook (listed in 2012) granted shares with large voting rights to pre-IPO shareholders, including Chairman and CEO Mark Zuckerberg. Voting rights then gradually became concentrated in a few individuals, as the original investors sold off their shares. Recent listings tend to concentrate more shares with large voting rights in the hands of founders.

Reuters previously said that SpaceX plans to divide shares into class A for public investors and class B – with high voting rights for insiders. Musk will hold the majority of voting rights, tying control of the Board of Directors and direct executive ability to the shares he holds. This structure is different from Tesla – another company run by Musk, when the electric car company has only one class of shares.