One of the most impressive feats of the current generation of tech oligarchs is that they have hacked not just computers or software, but the institutional form of the 20th-century firm itself.

In its ideal-typical version, the publicly traded corporation separated ownership from control. While shareholders did not manage the firm directly, they retained channels through which they could communicate with the managers responsible for overseeing their investment and hold them accountable. They could also try to coordinate with one another, organize fellow shareholders to pressure the board and, in extreme cases, even vote out the CEO.

Over time, however, the leaders of digital capitalism have undermined the institutional mechanisms of shareholder democracy. They have done so in three ways: share structure, domicile changes and the index fund. The recent IPO of Elon Musk’s SpaceX – which, having raised US$75 billion, was the biggest in history – represents the apogee of this process.

Alongside Musk’s far-fetched claims about data centres in space and the colonization of Mars, the SpaceX IPO showcased a more practical feat of corporate engineering. Through a version of the dual-class share structure pioneered by Google in its 2004 IPO, Musk controls 85% of the voting power, far more than the threshold needed to secure his position as CEO, CTO, and chairman of the board. In practice, that means he is the only person capable of firing himself.

This arrangement amounted to a hack of the mid-century corporate form, allowing Musk to tap public capital markets without being accountable to shareholders in the conventional way. For someone who had long resented the oversight that went along with taking a company public – which is why he kept SpaceX private for more than two decades – that looked like a way to have his cake and eat it: a private firm financed with public capital.

A shift in corporate domicile reinforced Musk’s ironclad rule. By moving Tesla and SpaceX from Delaware to Texas in 2024, he placed both companies under a legal regime that was much friendlier to CEOs than shareholders, limiting shareholder lawsuits and expanding the use of forced arbitration.

In doing so, Musk started a trend. ExxonMobil and Coinbase have also relocated to Texas, and Meta has reportedly held high-level conversations about making a similar move. His influence on corporate governance has become so pronounced that Stephen Bainbridge, a UCLA law professor, now teaches a course titled “The Corporate and Securities Law of Elon Musk”.

A third hack of the mid-century corporation came by way of the rise of the index fund. Totalling a minuscule US$21 billion in assets in 1993, index funds now manage more than $20 trillion. As a result, firms that account for a large proportion of the major stock-market indices have become increasingly critical to the financial fortunes of the average investor, whose retirement and college savings plans are more than likely invested in passive funds.

Traditionally, there was a significant interval between a company going public and its entry into a major stock-market index. Known as “seasoning,” this waiting period was intended to shield passive investors from the volatility of early trading and allow the share price to find its natural level after several months.

But the appetite for massive new listings like SpaceX has led major stock indices to relax these rules. SpaceX was among the first companies to benefit from this, as its seasoning period was shortened from five months to two weeks. As a “controlled company,” whereby a single person or entity holds more than 50% of the voting power, it is also not obliged to maintain a majority-independent board.

In recent years, a handful of tech companies have accounted for a disproportionate share of the stock market’s growth. Consequently, a small number of CEOs have become both unaccountable within their own firms and, by virtue of their firms’ systemic importance, effectively too big to fail. When SpaceX went public as one of the ten largest firms in the United States, it could be virtually assured of a government bailout were it ever to falter.

As if to press the limits of how far his behaviour could deviate from what had long been seen as acceptable, Musk spent the week before the SpaceX IPO posting incendiary tweets intended to escalate racial tensions in the United Kingdom. On the day of the IPO, he mentioned crack cocaine in his opening remarks. SpaceX still debuted at a price 11% higher than expected.

When Musk changed his title at Tesla from CEO to “Technoking” in 2021, most people took it as an online joke – Musk’s way of trolling the overly serious financial press. But as the concentration of wealth and power in the tech sector has increased, the autocratic quality of his leadership – exercised as if by divine right – has become more pronounced.

Strikingly, the SpaceX arrangement concentrates power to a degree rarely seen even in monarchies. Yet unlike most monarchies, the company has neither a designated deputy nor a formal line of succession. Were Musk to die, the appointment of a new leader would depend entirely on whoever inherited his shares and the votes attached to them.

The conflation of the corporate leader with the corporation produces a final tweak of the mid-century firm. In the 1950s, CEOs were still paid by salary. That income was subject to taxation at top marginal rates above 90%. In the 1990s, however, corporate executives began to shift towards being compensated in stock options.

Musk, who takes no salary but is awarded colossal tranches of stock options, embodies this shift in its purest form. Freed from tax obligations in the short term, he can choose when to exercise his options. He can also choose where to exercise them, adding yet another incentive for his decision to move from California, with its 13.3% top marginal income tax rate, to Texas, where it is zero.

In the meantime, Musk can secure ultra-low-interest loans by using those shares as collateral – a strategy known as “buy, borrow, die”. The result is that he has not only fused with his own firm but has also effectively become his own personal tax haven. In the age of the tech oligarchy, the CEO can say, after Louis XIV: “The public corporation, c’est moi.”

Quinn Slobodian is a professor of international history at the Frederick S. Pardee School of Global Studies at Boston University, co-director of the History and Political Economy Project and a member of the board of editors of the American Historical Review.

Copyright: Project Syndicate