Tesla should go beyond the board changes required by its settlement with the US’ top stock market regulator, a group of investors and elected officials said in a letter to company directors Thursday.
CtW Investment Group and other signatories, which collectively represent some $774 billion worth of union pension investments, says that adding two more independent directors to the board is a start, as per Tesla’s $40 million settlement with the Securities and Exchange Commission, but “does not by itself amount to a credible commitment to change the board’s composition.”
It’s not the first time CtW has been involved in a spat over Tesla’s board of directors. Ahead of the company’s annual shareholders meeting in May, CtW said CEO Elon Musk’s brother Kimball Musk — as well as Antonio Gracias and James Murdoch — should be booted from the Board. In the end, however, their push fell short and all three were reelected.
This time, however, elected officials have joined CtW’s call. New York State and New York City comptrollers and treasurers of Connecticut and Oregon have also cosigned the letter.
“Given the lack of responsiveness to fundamental governance concerns, we believe that shareholders need new stewards on the board,” the letter, addressed to directors Robyn Denholm, Linda Rica, and Murdoch, reads
The firm says it’s concerned about the lack of a timeline for director departures, and wants to see the board draw from a diverse set of candidates, rather than the high number of insiders that currently sit on the board.
“While meeting the technical definition of independence, 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,” the letter reads.
Tesla has until November 30 to replace Musk as chairman of the board, and until January to add two independent directorse, as per its settlement with the SEC. The company did not respond to a request for comment. Murdoch is reportedly being considered by some members as the best possible replacement.
“Given that shareholders have been calling for improvements to the board’s structure with little effect,” CtW says, “more concrete steps are needed to demonstrate to shareholders that the company is taking these concerns seriously.”
Last week, Tesla posted a surprise quarterly profit that sent the stock flying. The earnings beat came after an all-hands-on-deck push to get completed cars out the factory doors and delivered to customers, and a slew of executive departures that have reportedly left Elon Musk with an abnormally high number of direct reports.
The letter from CtW requests a response from Tesla by November 19.
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