An investor group at Tesla Motors is calling for changes to its board of directors and separating the roles of chairman and chief executive from CEO Elon Musk’s control, days after Tesla’s proposed bid for SolarCity.
CtW Investment Group, which works with union-based pension funds and holds 200,000 shares of Tesla, submitted a letter to Tesla calling for the addition of two independent directors to its board. The investor group would also like to see some of Musk’s power over the board reduced by adding another leadership position; Musk currently holds the CEO and chairman titles and is the largest shareholder at SolarCity. Musk owns 22 percent of SolarCity and 19 percent of Tesla.
CtW Investment Group is demanding the implementation of five steps it said would remedy Tesla’s “underlying governance deficiencies.” In addition to adding independent directors, CtW called for two independent directors to form a special committee to review the SolarCity deal; a declassification of the board so that stockholders may have an annual say on the election of all directors; and revision of the corporate governance guidelines to forbid that immediate family members of board members serve concurrently on the board. One of Tesla’s board members is Kimbal Musk, CEO of internet software company Medium Inc., and the brother of Elon Musk.
“The fiercely negative reaction to the proposed transaction only highlights the flawed (corporate governance) process and underscores our continuing concern about governance at the company,” CtW Executive Director Dieter Waizenegger wrote in the letter. “We believe the board of directors at Tesla must be restructured in order to insure that stockholder interests are protected during this proposed acquisition and going forward.”
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Last week, Tesla proposed an up to $2.8 billion all-stock acquisition of SolarCity. The company says its directors acted in the company’s best interest in the proposed acquisition.
“Tesla’s disinterested directors unanimously concluded that SolarCity is the most attractive asset in the solar market and that a combination can generate significant product and financial benefits,” the company said in a statement.
“Ultimately, our disinterested shareholders will have the final say on whether this combination is right for Tesla,” Tesla said. “Nobody has more at stake in the success of Tesla than Elon, and he and our Board have overseen the creation of tremendous value for all of Tesla’s stockholders.”
Five of SolarCity’s eight board have recused themselves from ruling on the Tesla deal because of their ties to the company or to Musk. SolarCity said that its formed a special committee of two director to evaluate Tesla’s offer. One of these directors, Donald Kendall, chief executive of investment management firm Kenmont, is the only member of SolarCity’s board with no direct ties to Tesla.
Musk’s ties to SolarCity have been strong. He played a leadership role in creating the rooftop solar company and serves as its chairman. Tesla investors are concerned that the two companies will not fit together, even though Musk envisions a single entity for clean energy shoppers, allowing them to purchase an electric vehicle, home solar system and battery backup with one trip.