Tesla Investors Want Elon Musk's Friends Off the Board, Increased Accountability
More than half of Tesla's board members have close personal ties to Musk, including his brother Kimbal.
A number of Tesla investors aren't pleased with Tesla's Board of Directors and its personal ties to CEO Elon Musk. According to a letter uncovered by Bloomberg, a coalition of investors is calling for a complete board overhaul that extends above and beyond an upcoming federally mandated disposition of Musk's seat as chairman.
After the automaker's recent run-in with the United States Securities and Exchange Commission (SEC), which cost both Tesla and Musk a combined $40 million in fines, investors are upping the pressure on the board to increase the CEO's accountability and gain more managerial independence across its seats, claiming that “shareholders need new stewards on the board."
“Five of eight current non-executive directors have professional or personal ties to Mr. Musk that, in light of recent events, appear to have put at risk their ability to exercise independent judgment,” reads the letter to the trio. “As the SEC has recognized, Tesla’s board needs directors who go beyond the technical definition of 'independence,’ and fulfill the spirit of the term.”
The investors, who currently control a combined $774 billion in assets, call on the three board members with the fewest ties to Musk: James Rupert Murdoch, Linda Johnson Rice, and Robyn Denholm, to help refresh the remaining five seats on the board with new faces. This would include removing board members Steve Jurvetson (who has taken a nearly year-long absence of leave), Antonio Gracias, and the CEO's brother Kimbal Musk.
An additional request from the coalition would ask Tesla to specifically seek out industry leaders for its board, a similar call made by manufacturing analyst Sandy Munro. Currently, the only board member with direct experience working for a major automaker is Denholm, who was employed with Toyota as a finance manager from 2014 to 2017.
In September, the SEC mandated that Musk must relinquish his seat as chairman of Tesla's Board of Directors after the CEO signed a no-guilt settlement over allegations of securities fraud and fiduciary misconduct. As part of the settlement, Musk will keep his role as CEO but must be removed from his board chairman position within 45 days of the settlement acceptance, making his last day no later than Nov. 30.
Per the SEC settlement, Tesla is already required to add two new independent members to its board to offset the CEO's influence over the company. Removing further personal ties would seemingly further strain Musk's sway in board decisions.