Ford vs. Ferrari? Tesla Reigns Supreme
July 9, 2020

Last week, Tesla (TSLA) became the most valuable automobile company in the world when it hit a market cap of $254B. This staggering accomplishment comes on the heels of an historic stock run in 2020 for Tesla who continue to silence the bears. The stock has seen a meteoric rise over 500% in the last 12 months.

The last decade hasn’t been as kind to traditional automobile companies. We’ve seen GM enter and emerge from bankruptcy, a massive emission scandal at Volkswagen, and declining performance at Ford (F) just to name a few. Ford stock has declined ~38% in the last 12 months.

Underpinning the underperformance of the incumbents, is a years-old theme of stale corporate governance. There are fundamental differences in vision that companies like Tesla and Ford employ, and you can see this in the construction of their boards of directors.  

Tesla: Modern + Diverse

Tesla has the board composition of a hip, forward thinking company from Silicon Valley, employing a splattering of tech savvy individuals from a variety of different industries. A few highlights:

  • Venture Capitalists: Steve Jurvetson (Future Ventures), Ira Ehrenpreis (DBL), Antonio Gracias (Valor)
  • CEOs: Larry Ellison, another visionary founder (Oracle), serves as a director in addition to James Murdoch, the previous CEO of Twenty-First century Fox
  • Younger: 4 directors are between 40-49 and just 2 are older than 60 – arguably representing a board that is more in touch with innovation and current business themes

Ford: Stale and Pale

Ford’s board doesn’t exactly exhibit excitement and fresh perspectives:

  • Older: 12/13 members of their board are older than 60
  • 3 board members have tenures that are greater than 20 years, including 2 members of the Ford family (Edsel B Ford II and chairman William Clay Ford Jr.)
  • Just 4 independent directors have technology expertise, according to the company’s proxy statement

This construction potentially results in more resistance towards innovative decision making in addition to reluctance from newer board members to push innovation.

Compensation

Although we’ve previously discussed the questionable practices of insiders at TSLA pledging shares for their individual purposes, there is no escaping the fact that the stock’s performance has reaped wild rewards to its shareholders (for now). 

Ford, on the other hand, appears to be overpaying its executives for their lack of performance.

With a pay package of $17.4M last year — above his peers — Jim Hackett, Ford’s CEO, was significantly overpaid compared to the company’s stock performance. Elon, for what its worth, owns billions of stock (also questionable) but is paid very minimal annual compensation.

Who will survive?

Time will tell, but one thing is for certain, technology and innovation aren’t going anywhere. With Tesla stock flying high, delivering more vehicles more consistently, and closing in on fully autonomous driving, it sure feels like Ford’s board is due for a refresh before Tesla becomes (actually) bulletproof.

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