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Chengis Khan

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Topics, Issues, and Controversies in Corporate Governance and Leadership
S T A N F O R D C L O S E R L OO K S E R I E S stanford closer look series 1
Tesla Motors: The Evolution of
Governance From Inception to IPO
Tesla Motors
In June 2010, Tesla Motors raised over $225 million in an initial public offering that valued the electric car manufacturer at $2 billion. It was the first time a U.S. automobile company went public since Ford Motor in 1956.
The evolution of Tesla—first incorporated in
2003 by engineers Martin Eberhard and Marc
Tarpenning—in some ways has been unique, given the nature of its business. Unlike many venturebacked companies, Tesla requires significant physical capital and plant and equipment for growth.
Almost all aspects of its operations—from concept design and development to mass production—are capital intensive. As a result, Tesla has had to seek multiple rounds of external financing since its inception.
In addition, the company’s operations are highly complex. The development of an electric car requires expertise in battery technology, automobile design, manufacturing design, and supply chain management. Overseeing this level of complexity places significant demands on company leadership.
Finally, the company is attempting to disrupt an established industry in which its competitors have considerable advantages in terms of size and position.
And yet like most companies, both private and public, Tesla has also faced its share of organizational challenges. Examples include difficulty in the early years developing a prototype with the desired technical specifications, production cost overruns, and unexpected leadership changes among management.
1 Together, these organizational and business model factors have had an impact in shaping the company’s governance structure as it exists today.
By David F. Larcker

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