Tesla Investors Press Automaker To Add Board Members Without Ties To Musk
Investors drafted a letter to Tesla’s lead independent director requesting the company to add board members without ties to Elon Musk.
Musk’s board is comprised of six members, five of which have direct connections with the CEO. The California State Teachers’ Retirement System, along with four other investors, fear that this situation could result in problems. The group of investors is asking that the Silicon-Valley startup begin a search for two additional independent directors, and move to yearly elections. According to Bloomberg, the letter sent to Tesla director, Antonio Gracias, included:
“Directors should be held to a higher standard of independence given the conflicts of interest that permeate this board. A thoroughly independent board would provide a critical check on possible dysfunctional group dynamics, such as groupthink.”
It seems that the electric automaker is honoring the recent letter. An email from a Tesla spokesperson reads:
“We are actively engaged in a search process for independent board members, which is something we committed to do several months ago, and expect to announce new additions fairly soon. We regularly engage with our shareholders and value their feedback.”
Tesla is also considering the move to annual director elections. Currently, Tesla has staggered three-year elections.
Tesla’s Current Board
- Kimbal Musk: Elon’s brother
- Antonio Gracias: A director at SpaceX
- Robyn Denholm: CEO at Australia’s largest telecom company, Telstra Corp.
- Brad Buss: former SolarCity CFO
- Steve Jurvetson: SpaceX director
- Ira Ehrenpreis: SpaceX investor
While Musk is the top shareholder, at ~21 percent, Gracias is actually the sixth-largest, with 3.75.
Etelvina Martinez, governing manager of CtW Investment Group, another of the letter signers, told Bloomberg:
“Getting independent people on the board is important in terms of holding management accountable. Shareholders need to be able to hold management accountable. While the stock price is doing extremely well, there are still concerns about corporate governance.”
Tesla is not the only company that is regularly persuaded by investors. This is the way the system works. Very few companies still have staggered three-year elections, and having an independent board is preferred and expected. Regardless of Tesla’s current stock success – share prices have soared 44 percent this year – the letter signers feel that it is important to address accountability sooner, rather than later. New York City Comptroller, Scott Stringer, told Bloomberg in an email about the situation:
“If Tesla truly wants to be forward-thinking, then it needs to embrace accountability and it needs to welcome diverse, independent opinions into its boardroom. Strong performance doesn’t insulate Tesla from accountability.”