According to one biography of Elon Musk, the CEO of Tesla and SpaceX, during a birthday party (apparently his 42nd, in 2013), he “donned a blindfold, got pushed up against a wall, and held balloons in each hand and another between his legs. The knife thrower then went to work. ‘I’d seen him before, but did worry that maybe he could have an off day,’ Musk said. ‘Still, I thought, he would maybe hit one gonad but not both.’”
At the same party, Musk entered a ring with “[o]ne of the world’s top sumo wrestlers. . . . ‘He was three hundred and fifty pounds, and they were not jiggly pounds. . . . I went full adrenaline rush and managed to lift the guy off the ground. He let me win that first round and then beat me. I think my back is still screwed up.’”
However, in the realm of entirely voluntary—and totally gratuitous—assumption of potentially deadly risk, Jeff Bezos, the 57-year-old founder, chairman, and CEO of Amazon.com, has just declared, “Hold my beer, / This won’t take long / Step back, son, and let me show you/ Just how it’s done.”
Reportedly, Musk plans to travel to Mars someday on a SpaceX vehicle. (Virgin Group founder Richard Branson, who is not its current CEO, intends to be among the first passengers on Virgin Galactic’s spacecraft next year.)
But in an Instagram video posted on June 7, Bezos announced that on July 20 he and his brother Mark will be aboard the Bezos-founded Blue Origin, LLC’s first flight to carry people: “[I]t’s a thing I’ve wanted to do all my life. It’s an adventure. It’s a big deal for me.”
Blue Origin describes its New Shepard vehicle, which travels about 62 miles above the Earth’s surface (“past the Karman line—the internationally recognized boundary of space,” so the sky will literally not be the limit) before returning to Earth with the aid of a parachute, as “fully autonomous. Every person onboard is a passenger—there are no pilots.”
Yet the Wall Street Journal recently observed that passengers of “space tourism” companies “aren’t protected by the meticulous federal safety regulations that govern commercial air travel”; instead, those firms are allowed to regulate themselves.
Beyond fulfilling the long-held dreams of these extremely successful executives, their vertical excursions will no doubt generate even more publicity for them and all of their companies.
But in planning such flights, are these maverick corporate leaders breaching their fiduciary duties to their (somewhat) more mundane companies, like Amazon and Tesla? If the boards of those companies fail even to attempt to oppose these activities, are the directors breaching their own fiduciary duties?
After all, as soon as the protagonist of Ralph Ellison’s Invisible Man (1947) is appointed to a responsible position in a social activist organization, a superior advises him, “We’d better go now so that you can get some sleep. . . . You’re a soldier now, your health belongs to the organization.”
If Bezos’ flight is successful, will that really prompt anyone to buy even more goods or services from, or through, Amazon? (For that matter, does it really make any difference to other potential Blue Origin passengers whether Bezos goes first, later, or not at all?)
If, however, the trip results in Bezos’ incapacity and/or absence, would Amazon— which, for all its popularity, is currently confronting concerns including employee treatment, consumer privacy, and antitrust issues—proceed to succeed (or, to succeed as much) without his insights and perspective?
Even though Bezos disclosed in February his plan to relinquish on July 5 his positions as Amazon’s CEO and chairman, and to assume the still ill-defined role of “executive chair,” Brad Stone’s in-depth profiles, The Everything Store (2013) and Amazon Unbound (2021) leave no doubt that he is the company’s chief visionary and driving force.
In short, where is this flight plan’s upside, so to speak, for Amazon?
More generally, what level of personal risk should corporate leaders, many of whom are protected constantly (and at great expense) by their companies’ security teams, be allowed to assume, on their own initiatives and inclinations?
In February 2012, the CEO of Micron Technology died in the crash of the high-performance personal aircraft that he had been piloting. According to the Wall Street Journal’s Shara Tibken and Don Clark, the executive had, several years previously, suffered serious injuries from a crash while performing a stunt for a Micron video, but had “credited his love of high-velocity sporting with helping him make snap business decisions,” and rejected the directors’ request that he discontinue his stunt flying.
The Journal’s Joann S. Lublin, in an article one month later, reported that the directors of another company had prevailed upon their own CEO, a former fighter pilot, to stop flying his single-engine prop plane on solo commuting trips between their Ohio headquarters and his home in New York state.
Having agreed to use a company plane and a co-pilot, that executive could no longer enjoy his previous practice of turning on the autopilot and doing “a lot of reading.”
The board ultimately allowed the CEO to make his commute alone in a private plane that he had purchased, but insisted on a company co-pilot during flights in which one of his colleagues was also aboard.
If their CEOs, or other key executives (including directors), are high-flying literally and/or figuratively (or possibly even flying while high, as did Harvard’s Richard Alpert (later known as Ram Dass)), boards and their counsel could consider at least eleven related issues.
First, should candidates for, or holders of, such positions be required to disclose to the board their habits of, and plans to engage in, physically and/or psychologically risky activities? If so, how will risk be defined and appropriate levels determined? (Although in this context line-drawing might well be complex, “the edge of space” could be a good starting point.)
Second, will the company require the executive to submit medical reports, and/or a physician’s (or other expert’s) approval, before engaging, or continuing to engage, in this activity? Will the company specify the medical or other experts who will make such determinations?
Third, will the company have any say in (or veto power over) the circumstances, equipment, leaders, and/or supervisors of an approved activity of an executive?
Fourth, if an executive requests approval to begin or continue a risky activity, which individual, or what group or committee, will make that determination on behalf of the company, and how (by majority vote?) will such a group resolve any disagreements among its constituents?
Fifth, what will be the penalty (reduction of compensation? termination?) for an executive who doesn’t fully disclose in advance the details of a proposed activity, who doesn’t request approval, and/or who disregards the company’s disapproval? Or are some executives so central to the company’s operations that they are effectively beyond penalizing?
Sixth, will it make a difference if an executive claims that a possibly-risky (and/or -illegal) practice enhances her governance performance?
For instance, in his 2018 best-seller on the spiritual and psychological benefits that might be obtained from psychedelic drugs, Michael Pollan observed, “As I write, the practice of microdosing—taking a tiny, ‘subperceptual’ regular dose of LSD as a kind of mental tonic—is all the rage in the tech community.”
Seventh, is there any legitimacy to the executive’s arguments that these restrictions will unduly “cramp my style”?
Not necessarily, if the board has already found it appropriate to require (at least the submission of) the resignation of any director who has committed “an act which might tend to bring [her] into public disrepute, contempt, scandal, or ridicule, or an act which might tend to reflect unfavorably on the Company or its business or reputation,” or of any director who has become “the subject of media attention that reflects unfavorably on his or her continued service on the Board.” By contrast, risk-related restrictions might be seen as both more objective and more justifiable.
Moreover, many top athletes are reportedly prohibited by their team/league contracts from participating even in friendly and casual extracurricular contests, because they might be injured.
In addition, just as the infamous irascibility of some larger-than-life CEOs has led to speculation that they could have been (or could be) even more effective leaders if they had been (or were) more personable, executives’ outsized personal “risk appetites” could be seen as similarly dispensable, and certainly at least as dangerous to the company’s bottom line.
Eighth, will it make a difference if other companies allow their own executives to engage in such behavior?
Not according to Shlensky v. Wrigley, 237 N.E. 2d 776, 781 (Ill. App. Ct. 1968), which held that “Directors are elected for their business capabilities and judgment and the courts cannot require them to forego their judgment because of the decisions of directors of other companies. Courts may not decide [allegations of negligence] in the absence of a clear showing of dereliction of duty on the part of the specific directors and mere failure to ‘follow the crowd’ is not such a dereliction.”
Ninth, is an executive’s propensity (whether or not indulged) to engage in personally risky activities a risk factor that must be reported by the company in its securities filings?
Tenth, should such tendencies and/or conduct also be disclosed to the providers of “key man insurance” that covers such an executive? (If the insurer isn’t already asking for such information and updates, shouldn’t it?)
Eleventh, should lenders and other creditors who are aware of a key executive’s risky habits or inclinations provide in their agreements with the company that his engaging in such behavior will constitute an event of default? Should they include such a provision even if they know of no particular predilection for personal risk-taking among the company’s key executives? In either case, how would such provisions be worded?
Twelfth, there is an interesting inverse of these concerns, both legally and morally: Does a board, or any individual director or officer, have any duty to encourage a fellow director or officer to seek assistance when effective treatment might actually diminish their colleague’s ability to contribute to the company?
For example, in a 2007 biography of Charles Schulz (1922-2000), the author and illustrator of the phenomenally successful Peanuts comic strip, one of his friends recalled, “He was always sad. . . . Who knows why? And I said to him, ‘You should go to a psychiatrist,’ and he said, ‘No, I don’t want to go to a psychiatrist because it will take away my talent.’”
Contemplating questions of such gravity, boards grounded in the fundamentals of “the governance space” might well consider how to bring their executives, one way or another, back down to earth.
[Portions of this post were adapted from Section 2.02 of my book on corporate governance.]
[This post is dedicated to the memory of Princeton’s Professor Robert Hollander (1933-2021), whose “Great Books“ course (the official title of which I don’t remember) introduced me, as a freshman, to the mysteries, marvels, and magic of Don Quixote, Paradise Lost, and, most of all, Inferno—which he and his wife, Jean Hollander, would later translate, along with Purgatorio and Paradiso, to great acclaim.
[Professor Hollander—who was by all accounts an extraordinary explicator of the Divine Comedy—probably never read, but I think that he would have appreciated, a reminiscence of Daitsu Tom Wright, a translator of Roshi Kosho Uchiyama’s commentaries on a classic Zen text:
[“One day I went in to see Roshi to ask him a question about something I had read in [the text]. Coincidentally, Roshi had a copy of the book open on his desk. He showed it to me, and I couldn’t help but sense how old the copy was, because it was all beaten up and every page was filled with notes in the margins. I kidded him that it must be about time to buy a new copy. Silently, he lifted his hand and pointed his finger at the bookshelf behind me. When I found the shelf he was pointing to, he said to take a look at the books there. In all, I counted fourteen copies of [the book] and every one of them was as raggedy as the next. And all of them had many lines underlined with notes in all the margins. I asked Roshi what changes when you read the same book so many times. His reply was quite interesting. He said, that ‘the lines you underline change.'”]
