The never-ending battle for the heart and soul of America
Simon J Evenett explores 250 years of contested American identity, and explains why tracking these deep philosophical battles is crucial for managing corporate risk...
Geopolitics
Does SpaceX herald a new era of corporate dictatorship?
Only Elon Musk can fire Elon Musk. This does not bode well for investors, pensioners, or democracy, warns Jerry Davis.
Rapid read:
- At the end of its trading debut on 12 June 2026, SpaceX had a market cap of $2.1tn, making it the sixth-most-valuable corporation in the US.
- The only person who can fire Elon is Elon. He is dictator-for-life of SpaceX, and there is nothing other investors can do about it.
- Market operatives have fast-tracked SpaceX for inclusion in major indices that populate the accounts of millions of retirees. Tens of millions of people will be shareholders in our newest corporate dictatorship.
Corporate autocracy: uncontested control
The rise of autocracy in the political world has been paralleled by a rise in corporate autocracy.
Over the past several years, tech companies and others have been going public with structures that essentially guarantee their CEO-Founder uncontested control over the company in perpetuity.
The SpaceX IPO is the most extreme example: Elon Musk holds a class of voting shares that allow him to select the board of directors who nominally oversee him, and there is no mechanism for other shareholders to oust him, no matter what his performance.
Call it corporate Caesarism.
In the political world, democracy and autocracy wax and wane over time. Ancient Rome, the inspiration for Americaâs founders, devolved from republic to empire during the time of Caesar. (This helps explain Zuckerbergâs hairdo.)
Or consider 19th century France. The revolution in 1789 replaced the monarchy with a republic.
After a coup dâetat in 1799, Napoleon declared himself Emperor (1804-1814), followed by the restoration of the Bourbon monarchy (1815-1830), the Orleans monarchy (1830-1848), the Second Republic (1848-1851), the Second Empire (1852-1870), and the Third Republic (1870-1940).
For a century, France was like a lasagna of alternating political systems.
Et tu, Elon? Musk is a prime example of corporate Caesarism in action.
The SpaceX IPO represents a hard swing toward corporate autocracy, and other AI firms might follow a similar trajectory.
Is this the end of the American system of ârepublicanâ corporate governance? And how worried should we be that this is happening at a time when most American families are invested in the stock market for their college and retirement savings?
Corporate republic or corporate empire?
On paper, a business corporation looks a lot like a constitutional republic. There is good reason for this: political scientist David Ciepley shows how constitutional democracies, starting with the US, modeled their governing documents on corporate charters.
He points out that, âThe earliest American colonies were literally corporations of the Crown. The Massachusetts Bay Colony was the Massachusetts Bay Company; the Virginia Colony was the Virginia Company.â
And when the colonies became independent states, they adapted their new constitutions from their old corporate charters, which shaped the creation of the Constitution of the US.
The startling lesson is that constitutional democracy and the business corporation are fraternal twins.- David Ciepley.
Corporate democracy has long been mostly ceremonial. The relevant âcitizensâ are shareholders; workers and other constituencies donât have a vote. Candidates for the board of directors are nominated by the board and almost inevitably run unopposed.
In the American system, shareholder proposals â the closest thing to direct democracy â are generally precatory (that is, advisory only). Shareholder voting appears about as effective as it is in Russian elections.Â
Now and then, however, the will of the âpeopleâ breaks through.
In 2021, a tiny impact investor, Engine No. 1, managed to get three dissident directors elected to the Exxon board with the support of three giant index funds (BlackRock, Vanguard, and State Street), which collectively own a quarter of the average American corporation.
Engine No. 1 was concerned that Exxon was not adapting its strategy to climate risk quickly enough, and managed to make a compelling case to the other Exxon âvoters.â Its victory was a shot across the bow to the rest of corporate America.
A venerable giant, descended from the 1911 breakup of the Standard Oil monopoly, had outside agents on its board. Who might be next?
One way for corporate elites and their allies to address the threat of insurgent shareholder democracy was to neuter the index funds that made it possible.
The hysterical campaign against ESG can be seen in this light. The legislature of Texas (home of Exxon) prohibited the state from investing with asset managers that âboycottâ fossil stocks â leading to its divestment from BlackRock.
Texas also sued Vanguard and secured a vow that the fund would remain passive going forward.
But a more direct way to prevent shareholder insurrections is to rig the elections by giving corporate leaders special classes of stock that bring extra votes.
This was an old tactic used by newspaper companies (e.g. the New York Times and Washington Post) and family businesses (e.g. Ford Motor Company). It has seen a surprising resurgence in the tech world.
When Google went public in 2004, founders Larry Page and Sergey Brin controlled a super-voting class of stock that gave them majority control. Facebook followed a similar playbook in 2012, giving Mark Zuckerberg 60% of the votes.
Zuck still controls an absolute majority of voting shares and can choose the board that nominally oversees him.
After Facebookâs successful IPO, there was an upsurge in dual-class voting structures in tech firms. This was particularly true for those funded by venture capital firms Andreessen Horowitz and Founders Fund, which portray themselves as âfounder-friendly.â
Since 2020, almost half of all tech IPOs feature these nondemocratic structures (Figure 1). The tech sector is increasingly autocratic.
Where voting power and economic interest collide
An implication of dual-class voting schemes is that there is often a large gap between voting power and economic interest.
Table 1 below lists the 20 S&P 500 firms for which index funds hold the least voting power. Those highlighted are companies with multiple share classes, and tech firms are well represented in this set.
BlackRockâs 6.1% stake in Alphabet, for instance, is worth roughly $130 billion â yet it is entitled to a paltry 2.5% of the votes.
But if shareholder votes mostly donât matter, why is this troubling?
The S&P 500âs muted giants
Here are the 20 S&P 500 firms for which index funds hold the least voting power. Those highlighted are companies with multiple share classes.
The puzzle of shareholder primacy
The intellectual godfathers of shareholder capitalism, Michael Jensen and William Meckling, published a widely influential article in 1976 that asked an intriguing question: âHow does it happen that millions of individuals are willing to turn over a significant fraction of their wealth to organizations run by managers who have so little interest in their welfare?â
At the time, most scholars believed that when shareholdings were widely dispersed (as was the case for most large US corporations), top managers could get away with being lazy, greedy, or too acquisitive because shareholders were powerless to stop them.
 Jensen and Meckling found this too simplistic, and (along with their followers) detailed the many forces that combined to focus executives on creating shareholder value.
At the most basic level, executives often own enough shares in their company to care about its valuation â and if they donât, the board will remedy that through equity-based compensation.
Shareholders elect directors who care about their reputation and would not want to be associated with a badly run company.
Mandatory disclosures are audited by prestigious accounting firms that need to maintain their credibility, and rigorous equity analysts pay close attention to those disclosures.
Scholars of law and economics discovered markets that had been previously overlooked, such as a âmarket for corporate chartersâ and a âmarket for corporate control.â
States compete to provide the most rigorous corporate laws to encourage companies to incorporate there, with Delaware the perennial winner due to its heavy dependence on incorporation revenues.
Stock exchanges promulgate rigorous listing requirements to reassure investors that a company listed on Nasdaq or the New York Stock Exchange meets high standards.
And if all else fails and a company is not creating sufficient shareholder value, activist investors will buy a stake in the company to harass its managers or even buy a majority of its shares through a âtender offerâ (which is not as romantic as it sounds).
The activist can then elect its own directors and replace the errant management team.
The upshot of all this is that shareholders can relax: there is a matrix of institutions ensuring that top managers strive for shareholder value, and they will be replaced if they fail.
Some legal scholars suggest that shareholders donât even need to bother voting in corporate elections because so many other forces keep management on track.
This system only works if there is contestability â that if the CEO screws up, they can be replaced.
Aligning a CEOâs incentives with shareholder value will not be enough if the CEO is inept, misguided, or a drug-addled megalomaniac with highly questionable judgment.
There has to be a way to get rid of a CEO who is not doing their job well â otherwise the system falls apart.Â
Dictator for life
The SpaceX IPO prospectus is the most entertaining securities filing since WeWorkâs dark comic masterpiece of 2019.
We learn on the first page that the Space Exploration Technologies Corporation, despite its name, is in SIC industry 7370 (âComputer Programming, Data Processing, and Other Computer Related Servicesâ), and is incorporated in Texas, not Delaware.
Delawareâs courts forbade the Tesla board from awarding Elon a $56bn, shareholder-approved compensation package.
In response, Texas changed its corporate laws to be more Elon-friendly, even creating a new set of specialized business courts designed for speed, and now Tesla and SpaceX are incorporated there (along with Coinbase, Exxon, and other recent corporate immigrants).
On page 251, we read that, âUpon completion of this offering, Mr Musk will continue to serve as our Chief Executive Officer, Chief Technical Officer, and Chairman of the board.
âNotwithstanding the preceding paragraph, pursuant to the terms of our charter, Mr Musk will only be subject to removal from the board and from his Chief Executive Officer and Chairman of the board leadership positions with the approval of the holders of at least a majority of the voting power of the outstanding shares of our Class B common stock, voting separately as a class.â
Elon is the majority owner of Class B shares.
Even Roman emperors could be fired if they neglected or abused their office. The only person who can fire Elon is Elon.
He is dictator-for-life of SpaceX, and there is nothing other investors can do about it.
So long corporate democracy?
After the Second World War, America sent teams of experts to Germany to understand what went wrong and to implement legal reforms.
The Decartelization Branch of the Office of Military Government was charged with breaking up the industrial monopolies and cartels that had enabled the Third Reichâs rise to power.
Michigan Law professor Dan Crane quotes a 1946 document: âThe Decartelization Branch… should, therefore, make every effort to teach the German people that political democracy cannot long survive the disappearance of economic democracy.â
It is a hard-won lesson that should not be forgotten.
At the end of its trading debut on 12 June 2026, SpaceX had a market cap of $2.1tn, making it the sixth-most-valuable corporation in the US.
Pliant market operatives have fast-tracked SpaceX for inclusion in major indices that populate the accounts of millions of retirees.
Like it or not, tens of millions of people will soon be shareholders in our newest corporate dictatorship. And AI giants Anthropic and OpenAI are waiting in the wings for their own trillion-dollar IPOs.
I, for one, did not vote for this.
Authors
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