Garvin Jabusch and Erika Karp, June 2026
Governance has never been a buzzword. Those who have spent careers in capital markets understanding how ownership actually connects to stewardship have known all along that governance isn’t one pillar among several—ultimately, it’s everything. It is the entire apparatus by which the people who supply capital hold the people who deploy it accountable, and every other question an investor can ask sits downstream of it.
What is new is not the concept but the spotlight. A collapse of governance in corporate America has reached a magnitude so stunning that even those who never gave the subject a moment’s thought are suddenly staring straight at it.
The poster child, of course, is the looming IPO of SpaceX. We don’t even know where to start, but let’s give it a shot. Traditional governance norms being smashed by this juggernaut include:
Voting control so concentrated it makes the dual-class structures we used to complain about look quaint. Through super-voting shares, Elon Musk will command roughly 85 percent of shareholder votes — a super-supermajority that decides every corporate question before it’s asked. For perspective, Mark Zuckerberg, long the cautionary tale of founder entrenchment, controls about 60 percent of Meta through his super-voting stock and voting agreements. SpaceX makes Meta look like a Swiss canton.
Board capture follows directly from that arithmetic. When one person controls 85 percent of the vote, the board serves at his pleasure, populated by friends and advisors, with no independent committee structuring executive compensation.
Which brings us to the compensation itself: a grant of 1.3 billion restricted shares tied to milestones like establishing a million-person colony on Mars and deploying 100 terawatts of orbital data center compute. Absurd targets, sure, but here’s the part that should make every fiduciary’s hair stand up—the S-1’s footnotes reveal he can already vote those shares despite having earned none of them. Unvested, unearned equity carrying full voting rights is, to put it gently, not how restricted stock is supposed to work. He can also borrow against those shares, subject to board approval, which, see above, is approval from a board he controls. And because the shares remain technically unearned, no tax liability attaches. He derives the power and the liquidity without the milestones, the earnings, or the taxes. The performance conditions exist mostly as narrative.
Then there’s the quiet period, which in this case appears to be neither. After the S-1 disclosed a deal under which Anthropic pays roughly $1.25 billion a month to rent compute from one of the Colossus data centers, Musk took to X to publicly dispute his own company’s filed terms— the kind of conduct that, in any prior era of securities enforcement, draws immediate regulatory attention. Nobody seriously expects consequences, and that expectation is itself the governance story. The quiet period exists precisely so that a controlling insider cannot shape the market’s perception of an offering outside the four corners of the registration statement. A CEO publicly relitigating his own S-1 in real time, to the largest follower count on a platform he owns and whose algorithm he controls, is not a gray area. It’s the regulation functioning as a suggestion, that is, not functioning at all.
The market structure side is, if anything, worse, because it conscripts the rest of us. The standard seasoning period before a newly public company can enter the NASDAQ-100 is roughly 90 days— a cooling-off interval that lets price discovery do its work before index funds are mechanically forced to buy. SpaceX gets in after 15 days, at the peak of the hype cycle, under a “fast entry” rule Nasdaq adopted weeks before the offering. FTSE Russell cut its window to five trading sessions, MSCI to ten. The traditional seasoning period, across much of the industry, has effectively been deleted. More than $30 trillion in assets is benchmarked to indexes that rewrote their inclusion rules in near-unison, and the practical effect is that every passive investor with a retirement account becomes a SpaceX shareholder whether they evaluated the company or not, and whether they wanted exposure to it or not. The fundamental market corrective— investors voting with their dollars— is neutralized when the dollars are voted for you. (Readers of our recent indexing content will recognize this as the logical endpoint of capital allocation without allocators: the index doesn’t read the S-1.)
There is one exception worth mentioning, because it proves the rule. S&P Dow Jones Indices, after opening a consultation that would have cut its seasoning requirement from twelve months to six and waived the profitability and float tests for mega-cap debuts, declined to change anything. It kept its existing eligibility requirements intact, which means SpaceX cannot enter the S&P 500 for at least a year, and not at all until it satisfies the same profitability and public-float standards every other constituent had to meet. This is the single most encouraging governance development in the entire affair, and it lays bare what the other providers actually did. S&P’s decision demonstrates that none of the accommodations were necessary—that “the methodology was designed for more conventional listing profiles” was never a constraint, only an excuse. The world’s most consequential benchmark looked at the same pressure, the same FOMO, the same trillion-dollar gravity well, and simply held the line. Everyone who bent chose to bend.
And should any of those conscripted shareholders later believe they were defrauded, the IPO has an answer for that too: mandatory arbitration. Shareholders waive the right to pursue securities litigation of the kind that has previously been one of the few functioning accountability mechanisms against Musk at Tesla and Twitter. The moat here isn’t around the business. It’s around the man.
The instinctive rebuttal is the one a Bloomberg columnist offered this week: if you dislike the governance, simply don’t buy the stock. Exit, not voice, is your remedy. It’s a fair point in a normal market— and it is exactly what the index engineering destroys. Exit presumes you can choose not to own the thing. The same column quotes New York City’s comptroller, steward of some $300 billion, conceding that divesting a single company would be unprecedented for a fund that only ever excludes whole sectors. So the largest owners are left with neither lever: voice is foreclosed by super-voting shares and forced arbitration, and exit is foreclosed by an index that conscripts them on day fifteen. Strip a shareholder of both voice and exit and you have removed the entire vocabulary of accountability. That is not a governance weakness. It is governance nullified by design.
All of this is in service of disclosures that themselves strain the meaning of the word. The S-1 claims a total addressable market of $28 trillion— characterized as the largest in human history— composed of roughly $23 trillion in AI and $3 trillion in launch, with essentially no methodology offered. Meanwhile the audited reality is a company where Starlink generates real revenue and everything else loses money, including an AI division running multibillion-dollar deficits. Investors are being asked to price promises, and the institutions whose job is skepticism have lined up to underwrite instead. One fund manager’s reasoning, reported in the New York Times, amounted to career risk management: miss the deal and answer for it alone, lose money on the deal and lose it in good company. That is herd behavior confessed in plain language, and it is the opposite of price discovery.
So why is governance suddenly the word of the moment? Because we are watching, in real time, what its absence looks like at trillion-dollar scale. Governance was never merely a compliance checkbox; it is the set of mechanisms by which capital holds management accountable to the people who supplied the capital— the connective tissue between ownership and stewardship. Strip it out and you don’t get dynamism, you get a personality cult with a ticker symbol, funded involuntarily by every American with a 401(k).
The irony is that this should be the easiest risk-management argument in the world. We don’t avoid governance failures because they’re immoral; we avoid them because the divergence between control and ownership at the heart of this structure is, across the peer-reviewed finance literature, associated with lower firm value, higher executive pay, and more value-destroying acquisitions — effects that compound rather than fade the longer the structure persists (summation of effects at Harvard Law). Be smart, not moral. The smart money, if any remains, knows what 85 percent voting control plus mandatory arbitration plus index conscription adds up to: a company you can buy but never own.
This commentary is provided for informational and educational purposes only and reflects the opinions of the authors as of the publication date. It is not intended as investment advice or a recommendation to buy or sell any security. References to specific companies or securities are provided solely to illustrate investment themes and should not be construed as investment recommendations. All investments involve risk, and past events are not indicative of future results.
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