Tesla (NASDAQ:TSLA) Investors Want Big Board Changes
- “It is time for a serious overhaul of the governance of the company,”
A group of Tesla (NASDAQ:TSLA) investors thinks the EV maker needs more than just a little new blood and that a ban on Elon Musk holding the Chairman’s job for 3 years while also acting as CEO should become permanent.
In a letter to 3 independent directors of Tesla’s board released Thursday, officials with 5 state or municipal pension funds and the executive director of an investor group affiliated with unions called for even more comprehensive governance changes than what a recent settlement with the Securities and Exchange Commission required.
They requested disclosure of a “refreshment plan” for Tesla’s board, more engagement with shareholders, a permanent separation of the CEO and Chairman’s job and several other governance provisions.
The settlement, which followed a securities fraud charge from the SEC over Mr. Musk’s ‘420’ Tweets about taking Tesla private, would make Tesla appoint 2 new independent directors, prevent Mr. Musk from serving as Chairman for 3 years, establish a new board committee and add controls for overseeing Mr. Musk’s communications, as well as pay penalties.
In the letter, the group, which combined hold about $322-M in Tesla stock, said the addition of new independent directors “does not by itself amount to a robust and credible commitment to change the board’s composition,” and that “more concrete steps are needed to demonstrate to shareholders that the company is taking these concerns seriously.”
“It’s time for a serious overhaul of the governance of the company,” said Dieter Waizenegger, the executive director of CtW Investment Group, an activist group that works with union-sponsored pension funds. Appointing two new directors, he said, is great, but “there needs to be more changes.”
Charles Elson, who directors a corporate governance center at the University of Delaware, such public letters are intended to have the effect of publicly shaming boards into taking action, or raising the attention of other shareholders.
Their suggestion of refreshing the board and making the CEO/Chairman split permanent are “totally called for,” Mr. Elson said.
“You should not be chairing the group that’s overseeing you,” he said. “This is an oversight issue. I do not think it’s going to happen, but if it calls attention to the problem, maybe it will be a catalyst for some change.”
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