Tesla’s board of directors is facing mounting pressure to prove just how prepared they are for the potential loss of Elon Musk, the erratic chief executive officer largely behind the breakneck rise and dramatic fall in the company’s valuation.
Karen Róbertsdóttir, a shareholder in Reykjavik, Iceland, has submitted a resolution for Tesla investors to vote in May on whether the board should prepare and maintain a key-person risk report. Several other shareholders who wanted to put forward proposals — at least one of which also pertained to Musk — are frustrated with the rollout of Tesla’s annual-meeting plans, saying it spared directors from even more heat.
If Róbertsdóttir’s motion makes it onto Tesla’s proxy, it would give investors a tangible way to force Tesla to be more forthcoming about an area of concern that’s been growing since Musk’s takeover of Twitter Inc. The carmaker’s directors designed an unprecedented pay package years ago that seeded the CEO with the means to agree to the $44 billion deal just as social media and technology company shares were beginning to plunge.
Twitter’s strain on Musk’s personal finances — he recently became the first person ever to lose $200 billion of net worth — and his sale of almost $40 billion Tesla shares in the midst of months of impulsive tweeting Several prominent Tesla investors were aggrieved by the board. One accuses the eight-member board members of being missing in actionWhile another mixed it up Musk discusses the social media platform he founded. overpaid for.
Tesla’s investor relations representatives and board chair Robyn Denholm didn’t respond to multiple requests for comment. In 2019, the electric-car manufacturer disbanded its communications department.
Tesla shares fell 3.5% Thursday, at 1 p.m. New York Time. The stock has fallen more than 70% since Musk disclosed in early April that he’d taken an initial stake in Twitter.
Róbertsdóttir shared a copy of the proposal she submitted to Tesla through Sumtris ehf, the Icelandic limited liability company she leads as CEO. She requested that the carmaker, which has only three executive officers and no COO, document the succession and financial impacts of key employees and minimize the financial impact.
“Tesla is frequently cited as a prominent example of a company that has so-called key-person risk, due to the prominence of its CEO and the lack of a clear public succession plan or strategy to ameliorate the impacts of his loss,” she wrote. “At present, Tesla shareholders can have little confidence that said risk has been at all ameliorated.”
It may be around the time Tesla convenes its annual meeting that investors find out from a Delaware judge whether the board’s decision to award an executive compensation package potentially worth $55 billion Musk was plagued with conflicts of interests and inadvertent disclosures.
During this period, James Murdoch and Denholm were among the directors pressed. the trial The issue of whether the pay for a part time CEO, who also runs four companies, was a hot topic in November. The son of media baron Rupert Murdoch said Musk had identified a potential CEO successor in recent months, though he wouldn’t say who it was.
It’s unclear whether a shareholder resolution on compensation will make it onto the agenda for Tesla’s May 16 annual meeting. The company published the details on page 56 of its 60-page annual report. 10-Q filing The deadline for resolution submissions was set at 22 December.
This year’s shareholder proposals may be limited, as investors only had eight in 2022. Tulipshare, a UK-based activist investing platform for retail traders, planned to file a say-on-pay measure for Musk’s compensation to be linked to environmental, social and governance metrics, but was among several shareholders that missed Tesla’s disclosure 10 weeks ago.
“As the new owner of one of the largest social media networks globally, Musk has absolutely no excuse for this move,” said Antoine Argouges, Tulipshare’s founder and CEO. “Instead, Tesla chose to do the bare minimum.”
Tesla is known to use more than just regulatory filings when making announcements about events. This includes annual meetings. This week, it published an 8-K, press release tweet About plans for March 1st investor day. You can find out more about the plans for a March 1 investor day. tweet From its verified account, March 2013, the company stated it would ask investors to authorize additional share to allow a second stock-split in two years. It then followed that up with an 8-K.
Meredith Benton, the founder an ESG-focused consulting firm who’s been involved in shareholder activism for 20 years, said she’s never seen a company announce an annual meeting date the way Tesla did.
“I don’t know anyone who filed. I know of several who intended to,” the founder of Whistle Stop Capital LLC said, referring to shareholder proposals. “Tesla’s investor relations team knows very well which investors have concerns with the company and could have let people know as a courtesy. An 8-K press release would have been more appropriate.”
Many corporate governance experts believe that Tesla fulfilled the legal requirements of the US Securities and Exchange Commission by disclosing its annual meeting date in its 10-Q.
“I don’t have a whole lot of sympathy for the activists’ complaints,” said Jill Fisch, a University of Pennsylvania professor who teaches corporate-law classes. “If the annual meeting change is in the securities disclosure, Tesla met its obligations.”
Others were more amenable to shareholders’ gripes.
“It’s the kind of thing that a board that knows it’s going to come under shareholder pressure tries to do to avoid uncomfortable questions,” said Brian Quinn, a corporate law professor at Boston College Law School. “It’s a short-term strategy, but it won’t hold back unhappy shareholders when the activists inevitably come calling for the Tesla board. I suspect that day isn’t far off.”
James McRitchie, Elk Grove, California, is a shareholder of Tesla Model S. He’s put forward seven proposals over the years, including for the carmaker to declassify its board and adopt a simple-majority voting standard. He was due to file a resolution to disclose political spending this year but he missed the deadline.
Tesla disclosed the meeting and filing deadline dates in a section of the 10-Q under an “other information” heading, McRitchie noted. “How much more buried can you get?”
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