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Analysis-Musk investigates the boundaries of governance by using children as guinea pigs. 

Rachael Levy’s

Reuters – According to nine corporate governance experts who gave varying interpretations of the startup’s code of conduct for workers, Elon Musk’s choice to have children with one of his top executives at Neuralink violated the bounds of corporate governance guidelines.

Musk is best known for his electric vehicle firm Tesla (NASDAQ: TSLA) Inc. and rocket company SpaceX, but he is also the CEO of Neuralink, a startup with roughly 300 workers that is working to build chips that connect the human brain directly to computers.

He and Shivon Zilis, one of his direct reports at the firm, had twins last November, according to a private court file obtained by Insider on July 6.

According to five people acquainted with the matter, Zilis, 36, has now informed some of her colleagues that she was not sexually engaged with Musk, 51, and that she conceived the children with him through in vitro fertilization (IVF). Reuters was unable to confirm the veracity of Zilis’ allegation.

Zilis, as well as Musk and Neuralink representatives, did not reply to calls for comment.

Relationships between bosses and subordinates are frowned upon at corporations and have lost several high-profile CEOs their jobs, according to corporate governance experts, since they violate most corporate regulations and raise worries about conflicts of interest.

She went on to say that the circumstance looked to “slip between the cracks” of the policy’s goal to eliminate conflicts of interest due to employee ties.
Neuralink’s code of conduct requires that any ties that may generate a conflict of interest be declared to the firm’s “people operations manager” so that the company may determine whether any conflict should be eliminated.

Reuters was unable to determine if Musk or Zilis had informed Kristy Highlands, the people operations manager, of their connection. The Highlands did not reply to comments.

According to a person acquainted with the company’s handling of the case, Neuralink has accepted Zilis’ depiction of a non-romantic connection, and she will remain in her post as director of operations and special projects. According to two people with firsthand knowledge of the situation, Musk and Zilis have continued to work together in the weeks following the disclosure of their having children, taking the lead at internal and external business meetings.

According to three people familiar with the incident, after discovering in recent weeks that competitor Synchron had beaten Neuralink in a human trial in the United States, Musk directed Zilis to visit the company’s CEO, Thomas Oxley, and schedule a meeting. According to the sources, Zilis and Musk spoke with Oxley shortly after about Musk potentially investing in Synchron.

 

Appropriate for Interpretation

According to four corporate governance experts, Zilis’s having children with Musk via IVF should be seen as having a “personal relationship” or “close friendship” under Neuralink’s code of conduct. The code defines a personal connection as one in which the parties maintain a “continuous romantic or intimate relationship and are not married to each other.” It in no way defines a close friendship.

“You’re overlaying personal and familial links atop professional relationships,” said Gabriel Rauterberg, a University of Michigan corporation law expert. “There is always the fear that someone with more influence may abuse their professional power in undesirable ways.”

The other five corporate governance experts contacted by Reuters either did not believe Musk and Zilis’ agreement violated the Neuralink guidelines or could not reach a firm judgment.

According to Usha Rodrigues, a law professor at the University of Georgia, “[t]his may come under “close friendship” if there is a continuous, co-parenting-type connection, but that is susceptible to interpretation.”
Reuters was unable to uncover the degree of Musk’s engagement in the lives of his children with Zilis. According to the court file seen by Insider, they requested that the children acquire Musk’s surname in April. Musk and Zilis both listed the same Texas address.

According to Joan Heminway, a business professor at the University of Tennessee law school, it is difficult to prove that Musk and Zilis are personally close, even if they had IVF together. “That’s the new wrench around here,” she explained.

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