By on April 27, 2018

Elon Musk

Earlier this year, Elon Musk agreed to stay on as Tesla’s CEO for another 10 years. But he may not remain as the chairman of its board. This week, the automaker announced some of the proposals to be voted upon at this year’s annual stockholder’s meeting. Among them was a bid to have Musk replaced by an independent director.

After previous complaints that board members were too closely tied to Elon, the company took on Johnson Publishing Company CEO Linda Johnson Rice and 21st Century Fox CEO James Murdoch. However, at least one shareholder is claiming that isn’t sufficient and drafted a proposal to have Musk replaced as chairman — saying that his involvement with SolarCity and SpaceX conflict with his commitment to Tesla Motors. 

The proposal drafted by Jing Zhao, who is claimed to own only 12 shares of Tesla’s common stock, suggests that Musk’s dual role as chairman and CEO might have been necessary in the company’s infancy but is unnecessary in its current state. He also said an independent chairman is the norm on the international market and feels Tesla should follow suit.

According to Mercury News, the company has requested shareholders to vote down any proposal that it appoint any board chairman who is otherwise independent from the company.  Here is the statement issued to shareholders:

“The Board believes that the Company’s success to date would not have been possible if the Board was led by another director lacking Elon Musk’s day-to-day exposure to the Company’s business. In light of the significant future opportunities for growth and the careful execution needed in order for the Company to achieve it, the Board believes that the Company is still best served by Mr. Musk continuing to serve as Chairman.

Moreover, the role of the Lead Independent Director protects the Company against any potential governance issues arising from a non-independent director serving as Chairman. This position is vested with broad authority to lead the actions of the independent directors and communicate regularly with the Chief Executive Officer. Additionally, the Company now has seven independent directors following the addition of two additional independent directors in July 2017. The Board believes that the broad authority of the Lead Independent Director and the presence of six other independent directors ensures that the Board acts independently. This current Board structure also is consistent with majority practice at large public companies: according to the 2017 Spencer Stuart Board Index, 72 [percent] of companies in the S&P 500 do not have an independent board chairman.

The proponent acknowledges that a combined Chief Executive Officer and Chairman is an effective form of leadership for an early-stage company, until it faces increased competition and rapid technological changes. The Board believes that it is precisely during times when a company must quickly adapt to constant change and outside pressures that Board leadership needs to be lockstep with the Company’s operations. Our achievements to date notwithstanding, the Company is still at a point in its development where we must execute well in order to realize our long-term goals, and separating the roles of Chief Executive Officer and Chairman at this time would not serve the best interests of the Company or its stockholders.”

Despite the recent hardships Tesla has been faced with, we doubt this proposal has any chance of passing. Elon Musk still has a huge amount of support from shareholders but the move does show that their confidence could be waining a bit during these troubled times. The vote takes place on June 5th, likely with Musk sitting at the head of the table in the aftermath.

[Image: Tesla Motors]

Get the latest TTAC e-Newsletter!

Recommended

21 Comments on “Tesla Shareholders Will Vote on Replacing Elon Musk as Chairman of the Board...”


  • avatar
    tallguy130

    12 shares? This is not news. Must be a slow Friday in he automotive world…

  • avatar
    Vulpine

    ” saying that his involvement with SolarCity and SpaceX conflict with his commitment to Tesla Motors.”

    I think that shareholder invalidated their argument with that statement as Solar City is part and parcel of Tesla, even if SpaceX isn’t.

    • 0 avatar
      turbo_awd

      @Vulpine – well, sure, but.. The argument is that if Solar City gets in trouble, he may spend too much time trying to fix that arm of the company and let the motor vehicle arm fall apart..

      • 0 avatar
        Vulpine

        The two are parts of a whole, Turbo. They both need each other because Tesla itself–their batteries and control systems–is the core of both operations, all told. The cars are nothing without the electricals and the energy systems are almost useless without something to use their power.

        People have argued that the grid, as it sits, cannot handle a massive influx of electric cars. They’re not necessarily wrong. The solar and storage part of Tesla is what will help the grid handle the added load.

      • 0 avatar
        civicjohn

        turbo,

        If they get in trouble? They were in trouble when the purchase was made, it’s nice to have a cousin pull you out of a jam.

        The “solar roof” is not exactly flying off the shelves, either.

        Now I’d buy shares of SpaceX in a heartbeat, alas, it remains private.

  • avatar
    SCE to AUX

    It’s “waning”, not “waining”.

    As for Mr Musk and Tesla, acquiring a different CEO would be a good idea, with him remaining as Chairman.

  • avatar
    Lorenzo

    This is MUTINY! Either shareholders are getting antsy, or maybe this is a manufactured ruse for Musk to back out the door before the crash. He’d still be CEO and a major stockholder with the proverbial skin in the game, but an “independent” chairman who can serve as a front man for the board to make difficult decisions would be useful if the model 3 mess doesn’t get resolved.

    Model 3 is the make-or-break vehicle for the company. If Musk pulls off adequate production, he can take credit as CEO. If he doesn’t and the company takes a dive, people can say it wouldn’t have happened if Musk had been in charge of the Board. Forget the stockholders, it’s basically his company in the public mind, so he needs to hedge his bet.

    Caveat: I’ve been reading a lot of political news lately, so I might be a little cynical.

  • avatar
    EBFlex

    If they really wanted Tesla to have any shot of success, they would remove Musk ASAP.

    He is a cancer at Tesla.

  • avatar
    Ugliest1

    Eh? “the move does show that their confidence could be waining[sic] a bit”??????

    You have one shareholder with the significantly large and underwhelming number of 12 shares putting in a proposal and it “shows that shareholders’ confidence could be waning”? Don’t you have to wait for the actual vote to be held to find out how shareholders [plural] feel?

  • avatar
    arthurk45

    Elon Musk has screwed the cultist shareholders by assuming masive debt for the solar company, enrichening only himself and his relatives – solar company owners. In case you haven’t noticed, only Elon Musk is getting wealthy from his never profitable car company. Musk may be the greediest, cheapest sleazebucket on the planet. I know from his many failures in SpaceX, design and production of the Model 3, the widowmaking Autopilot, the recently panned “hyperloop” (an insane design that accomplishes nothing even if it would work) , etc, that he is almost totally incompetent. But he has tapped into a group of customers even dumber than he is (global warming fruitcakes) – they buy his vastly overpriced cars and his vastly overpriced company stock.

    • 0 avatar
      SCE to AUX

      Please describe his “many failures at SpaceX”.

      Are you referring to the numerous government and commercial satellites they’ve put up, or perhaps the many resupply missions to the International Space Station?

      I won’t hold my breath for your reply.

      PS: You also don’t seem to understand the functional requirements of SAE Level 2 autonomy. It does not have to actually work.

      • 0 avatar
        mcs

        I read a report that Elon Musk and SpaceX are so successfull that they might be driving the russians out of the space launch business. Between that and ground to air missles that can’t hit a single target, maybe russia should replace putin with a new dictator.

      • 0 avatar
        civicjohn

        SCE,

        No doubt they have had success at SpaceX, even with government money. That’s why it isn’t public. I’d buy it in a heartbeat. That stuff is cool.

        Just make sure you follow the SEC filings. There are approximately 169 million shares outstanding, of which EM owns about 38 million, or about 22.5% of shares. Of the shares EM holds, almost 14 million are pledged as collateral (that means loans). Since the stock is down about $100 from the 52-week high, that’s well over a 1 BILLION haircut.

        Sometimes the best humor just comes from the SEC filings.

  • avatar
    thelaine

    Tesla is a religion that sells cars. Repent, Musketeers. Armageddon is nigh.

  • avatar
    dantes_inferno

    Above photo: Elon Musk surrenders to authorities.

  • avatar
    dukeisduke

    I’m all for replacing him at Tesla Motors, and keeping him running SpaceX and the other businesses. He seems to be doing a good job with the latter, but someone with actual experience building cars should be running Tesla Motors.

    • 0 avatar
      Vulpine

      Innovation usually means thinking outside the box, as it were. Putting a car person in charge of Tesla sacrifices the innovation the automotive market NEEDS to continue the direction of changes we’re seeing in today’s market.


Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • redgolf: so it’s also a “smart” car too!
  • Corey Lewis: This is a GOOD idea. The PMC Signature Program, for select vehicles only. Have them fill out an...
  • Menar Fromarz: I personally don’t see a problem with the expansion of non ICE tech as there are distinct...
  • sportyaccordy: They should start a restoration program. Bring a clunker DWB Civic/Integra in with $50K or so, leave...
  • Vulpine: The question comes with how he got to be hired there. Supposedly, a salesperson needs to be bonded for...

New Car Research

Get a Free Dealer Quote

Staff

  • Contributors

  • Timothy Cain, Canada
  • Matthew Guy, Canada
  • Ronnie Schreiber, United States
  • Bozi Tatarevic, United States
  • Chris Tonn, United States
  • Corey Lewis, United States
  • Mark Baruth, United States
  • Moderators

  • Adam Tonge, United States
  • Corey Lewis, United States