\n<\/p>\n
In January, SpaceX granted Elon Musk, its founder and chief executive, a pay package of 1.3 billion restricted shares. The award was contingent on the rocket company\u2019s establishing a colony on Mars with one million inhabitants and launching high-powered data centers into space.<\/p>\n
Mr. Musk has not achieved those goals. Even so, he can vote those 1.3 billion shares in shareholder decisions, according to SpaceX\u2019s offering prospectus, which was released on Wednesday. In other words, the company is allowing Mr. Musk to vote with shares he has not yet earned.<\/p>\n
\u201cI have never heard of this,\u201d said Ann Lipton, a law professor at the University of Colorado, Boulder. \u201cHe basically found a way to hack the normal rules of corporate organization.\u201d<\/p>\n
The restricted shares weren\u2019t the only unusual corporate governance arrangement that SpaceX revealed as it prepares what could be the largest initial public offering ever. The company, which builds rockets and operates the Starlink satellite internet service, has valued itself at more than $1.25 trillion, and its I.P.O. \u2014 which is set to happen as soon as next month \u2014 is likely to create a bonanza for Wall Street, Silicon Valley and, of course, Mr. Musk.<\/p>\n<\/div>\n<\/div>\n
Among the atypical arrangements, SpaceX does not plan to have the majority of its board be independent directors. It added that it would not use a committee of independent board members to determine executive compensation, as most companies do. And its governing documents say any shareholder claims under federal securities law must be resolved through arbitration.<\/p>\n
All of these moves appear to benefit one person: Mr. Musk.<\/p>\n
The measures give him more command over a company where he controls 85 percent of shareholder votes, corporate governance experts said. They allow Mr. Musk to put more insiders onto SpaceX\u2019s board, pick the people who determine his pay and largely insulate himself from shareholder lawsuits, they said.<\/p>\n
The measures are \u201ca defensive moat\u201d that will \u201centrench him permanently\u201d as chief executive, said Brian Quinn, a law professor at Boston College who studies corporate governance. He called the January compensation package \u201cinsane.\u201d<\/p>\n
What SpaceX is doing goes beyond the corporate governance structures at Tesla, Mr. Musk\u2019s electric carmaker. In September, Tesla awarded him a stock compensation package tied to increases in the company\u2019s valuation and operational milestones, such as the commercial deployment of one million autonomous taxis. But Mr. Musk cannot vote with those shares until he hits the operational goals, according to Tesla\u2019s filings.<\/p>\n
SpaceX\u2019s governance measures serve as a warning to those looking to buy into its I.P.O., Mr. Quinn said. \u201cIt\u2019s terrible for shareholders,\u201d he said.<\/p>\n<\/div>\n<\/div>\n
Mr. Musk, SpaceX and Tesla did not respond to requests for comment.<\/p>\n<\/div>\n<\/div>\n
At Tesla, where Mr. Musk has less than a 30 percent ownership stake, he has griped about his lack of control and the potential to be challenged by other shareholders. But SpaceX has different classes of stock, and his power there stems from what are known as \u201csuper voting\u201d shares.<\/p>\n
Outside investors in SpaceX are able to buy Class A shares, which confer one vote apiece. According to the company\u2019s prospectus, Mr. Musk owns more than 5.5 billion Class B shares \u2014 \u201csuper voting\u201d because they carry 10 votes a share. In total, he has about 94 percent of SpaceX\u2019s Class B shares and 85 percent of all votes.<\/p>\n
Mr. Musk\u2019s super voting shares stand out. Meta and Google also have super voting shares for its executives. Even so, Mark Zuckerberg, Meta\u2019s chief executive, controls 61 percent of the votes at his company.<\/p>\n
The shares give Mr. Musk the power to decide many company matters on his own. \u201cMr. Musk will have the power to control the outcome of matters requiring shareholder approval, including election of all our directors, and to control our business and affairs,\u201d according to SpaceX\u2019s prospectus.<\/p>\n<\/div>\n<\/div>\n
Among SpaceX\u2019s eight board members are Mr. Musk\u2019s friends Luke Nosek, a venture capitalist, and Antonio Gracias, a private equity investor who previously was on Tesla\u2019s board. They did not respond to requests for comment.<\/p>\n
A significant portion of Mr. Musk\u2019s super voting shares were awarded in his January compensation package. He can take out loans against those shares with approval from a board that he controls, Boston College\u2019s Mr. Quinn said, adding that because the billionaire has not technically earned that stock, he does not have to pay taxes on the grant.<\/p>\n
Some of SpaceX\u2019s governance measures have already drawn scrutiny. This month, leaders overseeing state and city pension funds in New York and California criticized the company\u2019s stipulation that shareholder challenges must be resolved through mandatory arbitration.<\/p>\n
\u201cMandatory arbitration eliminates the class-action lawsuit structure essential to remedying widespread harms,\u201d officials overseeing the pension funds wrote in a letter to SpaceX. They added that no major U.S. issuer had ever had such a provision for its I.P.O.<\/p>\n
SpaceX\u2019s corporate governance structure \u201cfreaks me out,\u201d Ms. Lipton of the University of Colorado said.<\/p>\n<\/div>\n<\/div>\n