Lessons in corporate governance from the Trump-Musk spat
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I'm David Brancaccio in Los Angeles. Good morning to you. We'll start with the ugly breakup of the relationship between President Donald Trump and professional businessman and amateur federal budget cutter Elon Musk, who thinks President Trump's signature tax cutting and federal program cutting bill is bloated and financially destructive.

As you've been hearing, Musk has gotten personal and Trump is threatening moves that will hurt Musk's companies, including SpaceX and Tesla. There are lessons in corporate governance here. Eric Gordon is a professor at the University of Michigan's Ross School of Business with a long resume as a corporate lawyer. Morning, Eric. Hello, David. Look, Elon Musk is not some rando gadfly with an Internet connection, right? He's the head of several big companies. Maybe I'm naive, but...

At a publicly traded corporation, you'd think the CEO would have a duty to not set fire to more than $100 billion in shareholder value because of his extracurricular activities. Yeah, CEOs and board directors have what's called a fiduciary duty. In the law, that's a really high duty to protect the interests of the shareholders. And part of that would be the boards of directors, I guess,

thought would have a duty to set limits on activities that make shareholder value vanish? You would think so. I mean, they must be get paid for doing something. But those of us who practice corporate law often think of the boards as being the lapdogs of their CEOs.

You know, Tesla might be more of a lap puppy kind of board. Well, how does that work? You get your friends on the board, I suppose. But also, if the CEO owns a lot of the company, the board's power is actually diminished.

If you're the CEO and you own enough shares to have voting control, you can vote off the island any director you don't like. I mean, maybe there are limits. Unnamed sources told The Wall Street Journal a couple of weeks ago that Tesla might be looking for a new boss. The company then denied that vehemently. But I was surprised because it seems as if the board doesn't have the effective power to remove him if it ever came to that.

They don't, but they might have to go through the motions. And here's why. Other shareholders, shareholders who are not named Elon Musk, could sue directors saying they've neglected to do their duties. So once in a while, I think the board has to make some noises like, oh, look, we are trying to do our duty here. Then there's the president of the United States, the other counterparty to this dispute.

Somebody tweets in ways that are unhelpful to his standing and agenda. And the president's move is to change government rules to punish the guy's –

That's how it's supposed to work? It's not supposed to work that way. Here's what I think is unusual this time around. It's unusual that the president does it publicly. Usually they do it sort of secretly. There's a long tradition of using the IRS and even the SEC to punish your enemies, but you don't announce it in the press. Yeah, I mean, it is not unprecedented. President Nixon used the Internal Revenue Service to go after political foes. I think there's strong evidence.

And it's a long-standing thing. Franklin D. Roosevelt used the IRS to go after his foes. So it's something that presidents know how to do and don't hesitate to do in private. Interesting. And not just the IRS. SEC, Securities and Exchange Commission, is sometimes harnessed to punish political foes, right? And we know the SEC and Musk don't get along already.

Eric Gordon is a professor at the University of Michigan's Ross School of Business. Speaking from Ann Arbor, Eric, always good to catch up. My pleasure, David.

Tesla's stock fell more than 14 percent yesterday, erasing more than $150 billion of that company's value on paper. SpaceX is privately held, so is ex-Musk's social media company. Politico is reporting that the White House has scheduled peace talks between Musk and Trump sometime today. Tesla futures this morning are up about 4 percent.

We will get the market-moving hiring and unemployment reports a little later this morning. To what extent will we see tariff turmoil affecting hiring in those main numbers? We shall see. Dow, S&P and Nasdaq futures are all up in the three to four-tenths of a percent range.

President Trump says his first conversation with Chinese leader Xi Jinping since returning to the White House had a, quote, very positive conclusion. The call did lead to the announcement the two countries will hold trade talks in hopes of breaking an impasse over tariffs and global supplies of rare earth minerals.

The Chinese foreign ministry says Xi asked Trump on yesterday's call to, quote, remove the negative measures the U.S. has taken against China. Although the U.S. and China lowered their tariffs from the U.S. high of 145 percent, they're still running at about 30 percent, factoring in existing import taxes.

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Investing is risky. Robinhood Financial LLC member SIPC is a registered broker-dealer. Cryptocurrency services are offered through an account with Robinhood Crypto LLC, NMLS ID 1702840. Robinhood Crypto is licensed to engage in virtual currency business activity by the New York State Department of Financial Services.

Be forewarned. The AMC movie theater chain says it will show even more ads ahead of feature films beginning in July. So if you're there for the ads, knock yourself out. But if you're there for the movie, remember your remote controls fast forward does not work in that setting. And some ads will show up between preview trailers. Something new at AMC Marketplace's Henry Epp reports.

AMC already plays some ads before its movies, usually before the previews. Now it'll offer advertisers a spot after the previews, right before the movie starts. Alicia Reese, who analyzes entertainment companies at Wedbush Securities, says companies will likely pay top dollar. Because you have a perfectly focused environment where everyone is staring at the screen, lights down, phones away. So it's highly valuable.

Other theater chains have had these ads for years. AMC held off because the company reportedly worried they would anger moviegoers. But Paul Dergarabedian at Comscore says they haven't hurt other theaters. So I think as long as it's not overbearing, overdone, overly long in terms of the presentation of the pre-release films,

And he says it's a good time for AMC to try this. There's a full slate of movie releases this summer after several years disrupted by the pandemic and labor strikes in Hollywood. I'm Henry Epp for Marketplace. I don't know, maybe this is all an argument for going to see a live play or an orchestral performance instead.

Our digital producer is Dylan Mietten and our engineers are Alex Simpson and Brian Allison. In Los Angeles, I'm David Brancaccio. It's the Marketplace Morning Report from APM American Public Media.

Really quick before you go, please complete a short anonymous survey by going to marketplace.org forward slash survey. It should only take about 10 minutes. And as a token of our appreciation, you can enter your name to win a $75 gift card when you've completed the survey. You do all of us at Marketplace a huge favor by filling it out.