Union-backed investors want more change at Tesla
A group of Tesla investors wants the electric-car maker’s board to grow up.
A Securities and Exchange Commission settlement that requires Tesla to replace Elon Musk with a new chairman and add two independent directors doesn’t go far enough to fix the company’s corporate governance woes, according to a union-affiliated investor group and officials representing major pension funds in five states.
The investors — several of which have pressured Tesla in the past, and achieved mixed results — laid out a series of measures the board should take to boost oversight and better hold Musk accountable as chief executive officer. The billionaire’s run-in with the SEC over allegations of securities fraud have added urgency to changes that the investors say are long overdue.
“Shareholders need new stewards on the board,” the investors wrote in a letter Thursday to three of Tesla’s independent directors. The signatories are officials with California, Connecticut, Oregon, New York state and city pension funds, plus CtW Investment Group, which is affiliated with a federation of unions.
Tesla representatives didn’t have immediate comment. The company’s shares rose as much as 2.7 per cent Thursday and are up about 10 per cent this year.
The group wrote that they help oversee about $774 billion (U.S.) in combined
assets and say they’re substantial investors in Tesla. They call for the creation and release of a plan to refresh the board and for timelines to be set for some directors to leave.
The investors also ask that the board permanently separate the chairman and CEO positions, a step beyond the SEC settlement that prevents Musk from being able to hold both jobs for three years.
“There needs to be a complete overhaul of this board, and the new chair needs to be a strong, accomplished individual who can oversee Elon Musk,” Aeisha Mastagni, a portfolio manager for the California State Teachers’ Retirement System, known as CalSTRS, said by phone.
Musk, 47, put his future at Tesla in jeopardy by sending tweets in August claiming to have secured the funding and investor support to take the company private.
He and the company settled fraud allegations last month by agreeing to each pay $20 million and didn’t admit or deny wrongdoing.
“Tesla is a sterling example of how insular boards fail companies and shareholders alike,” New York City Comptroller Scott Stringer, one of the letter signatories, said in an emailed statement.
Investors have long criticized Tesla’s board for several directors’ close personal and professional ties to Musk that date back years. In April 2017, the California State Teachers’ Re- tirement System, New York City Comptroller Scott Stringer and CtW were among those who called for the company to add new independent directors. James Rupert Murdoch and Linda Johnson Rice were appointed about three months later.
A group of Connecticut pension funds also pushed last year for Tesla to move to annual director re-elections. The measure was defeated, and board members continue to serve three-year terms.
This year, CtW waged a campaign against the re-election of three board members. Share- holders voted to keep the directors and opposed an independent chairman.
In their letter Thursday, the investors urged Tesla’s nominating and corporate governance committee to give firm dates for when directors Antonio Gracias and Kimbal Musk — Elon’s brother — will leave the board. They also called for Steve Jurvetson to be removed immediately after an almost year-long leave of absence.
“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 investors wrote. “As the SEC has recognized, Tesla’s board needs directors who go beyond the technical definition of ‘independence,’ and fulfil the spirit of the term.”
The investors called for the board to adopt proxy-access rights that would give longterm shareholders the ability to nominate their own slate of directors. They also asked for Tesla to improve the diversity of the board and find directors who have experience that “specifically match the company’s strategy and current skill sets.”