A cohort of powerful Tesla investors are now pushing the automaker to establish a stronger board of directors, independent and free from the influence of chief executive Elon Musk. With Tesla’s growing market share and importance in the automobile industry, the investors want to build a stronger boardroom that’s exempt from ‘groupthink.’
These investors believe that most board members have personal or professional ties to Musk outside of Telsa and this could jeopardize their fair decision-making power. Currently, Tesla’s board consists of Steve Jurvetson, Ira Ehrenpreis, and Antonio J. Gracias, who’re also investors in Musk private space company SpaceX. His brother, Kimbal Musk and Brad Buss (former CFO, SolarCity) are also on the board. There’s most likely just one independent member — Robyn M. Denholm, the former executive VP of Juniper Networks.
The influential cohort creating a pressure on the automaker includes the California State Teachers Retirement Fund along with four other investor groups. The five investors recently sent a co-signed letter, demanding for the appointment of new independent board members, to Tesla director Anthony Gracias. The changes they’re demanding include the appointment of two independent directors, with not ties to the chief executive and an annual re-election procedure for all current directors. An excerpt from the letter read:
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.
To this, Tesla responded that they’ve been actively pursuing the search for new board members for the past ‘several months’ and that we should expect an announcement really soon. In an email statement to Bloomberg, a Tesla spokesperson said,
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.
This particular request was first served by the investors back when Tesla was amidst the process of acquiring SolarCity and questions about its governance were brought to the table. This was because the solar giant was chaired by Musk, who was the largest investor in the company at the time. The investors, as well as SolarCity shareholders were wary of the corporate decision being influenced by the legendary magnate. However, it is now a done deal and the company is gearing up to release its new solar tiles and solar panels in the coming weeks.
The timing of the request is of significance as, for those unaware, Tesla’s became the most valuable automobile manufacturing firm in the US earlier last week. The company’s share prices have on a high tail, soaring like crazy as the production of Model 3 begins in a few weeks. It managed to beat both Ford and General Motors in terms of total market value, which peaked to $53.06 billion. The electric automaker, however, still has a long way to go before it matches up to them in terms of sales.
