Analysis-Musk tests limits of governance by having children with aide
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[August 26, 2022] By
Rachael Levy
(Reuters) - Elon Musk's decision to have
children with one of his top executives at Neuralink pushed the limits
of corporate governance norms, according to nine corporate governance
experts who offered divergent interpretations of the startup's code of
conduct for employees.
Known more widely for his electric car maker Tesla Inc and rocket
developer SpaceX, Musk is also the chief executive of Neuralink, a
company with about 300 employees that is seeking to develop chips that
connect the human brain directly to machines.
He and Shivon Zilis, one of his direct reports at the company, had twin
babies last November, Insider reported on July 6, citing a confidential
court filing.
Zilis, 36, has since told some of her colleagues that she was not
involved romantically with Musk, 51, and conceived the children with him
through in vitro fertilization (IVF), according to five people familiar
with the situation. Reuters could not establish the accuracy of Zilis’
account.
Zilis and spokespeople for Musk and Neuralink did not respond to
requests for comment.
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Relationships between supervisors and subordinates are frowned upon at
companies and have cost some high-profile CEOs their jobs, as they
violate most corporate policies and raise concerns about conflicts of
interest, corporate governance experts said.
Neuralink’s 62-page employee handbook, a copy of which was seen by
Reuters, prohibits dating, “personal relationships” and “close personal
friendships” between employees in a direct supervisory relationship to
avoid any conflicts of interest.
But the facts presented by Musk and Zilis’ relationship are so unusual
that the corporate governance experts who reviewed the policy for
Reuters expressed divergent views on whether they thought the
entrepreneur had violated it by having children with his subordinate
through IVF.
“Whatever lawyer wrote this language did not contemplate this
situation,” said Nell Minow, vice chair of corporate governance
consultancy ValueEdge Advisors, referring to the Neuralink code of
conduct.
She added that the situation appeared to “fall between the cracks” of
the policy’s intent to avoid conflicts of interest due to relationships
between employees.
Neuralink’s code of conduct calls for relationships that can create a
conflict of interest to be disclosed to the company’s “people operations
manager” so that the company can decide whether it should take steps to
eliminate any conflict.
Reuters could not learn whether Musk or Zilis had disclosed the
relationship to Kristy Hilands, the people operations manager. Hilands
did not respond to requests for comment.
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![](../images/082622PIX/busine35.jpg)
Elon Musk attends the opening ceremony
of the new Tesla Gigafactory for electric cars in Gruenheide,
Germany, March 22, 2022. Patrick Pleul/Pool via REUTERS/File Photo
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Neuralink has accepted Zilis’ description of a non-romantic relationship, and
she continues in her role as director of operations and special projects, a
source familiar with the company’s handling of the matter said. In the weeks
since the disclosure of their having children, Musk and Zilis have also
continued working together, taking the helm at internal and external company
meetings, according to two people with direct knowledge of the matter.
For example, after learning in recent weeks that competitor Synchron had beaten
Neuralink to a human trial in the United States, Musk sent Zilis to approach the
company’s CEO Thomas Oxley and arrange a meeting, according to three sources
familiar with the matter. Zilis and Musk spoke with Oxley shortly after about a
possible investment by Musk in Synchron, the sources said.
OPEN TO INTERPRETATION
Four of the corporate governance experts said they believed Zilis having
children with Musk through IVF should be read as having a “personal
relationship” or “close friendship” under Neuralink’s code of conduct. The code
defines a personal relationship as one where the individuals have a “continuing
relationship of a romantic or intimate nature and who are not married to each
other.” It does not define a close friendship.
“You’re layering intimate familial bonds over professional relationships,” said
Gabriel Rauterberg, a corporate law professor at the University of Michigan.
“There is always the worry that someone with greater power will use their
professional power in ways that are inappropriate.”
The other five corporate governance experts interviewed by Reuters either did
not think Musk and Zilis’ arrangement was a breach under the Neuralink policy or
could not come to a definitive conclusion.
Usha Rodrigues, a professor at the University of Georgia’s law school, said Musk
and Zilis’ situation “may fall under ‘close friendship’ if there is an ongoing,
co-parenting type relationship, but that is subject to interpretation.”
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The extent of Musk’s involvement in the life of his children with Zilis could
not be learned by Reuters. The court filing published by Insider shows that in
April, they asked for the children to take Musk’s last name. Musk and Zilis also
listed the same address in Texas.
Joan Heminway, a business professor at the University of Tennessee’s law school,
said one cannot easily prove that Musk and Zilis are close personally, even if
they had IVF together. “That’s the new wrench here,” she said.
(Reporting by Rachael Levy in Washington, D.C.; Editing by Greg Roumeliotis,
Paritosh Bansal and Edward Tobin)
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