In a bid to increase the diversity of opinions on Tesla’s board of directors, 5 large institutional investors — amongst which are the California State Teachers’ Retirement System (Calstrs), the CtW Investment Group, and the Connecticut Retirement Plans & Trust Funds — have signed a letter recently sent to Tesla director Antonio Gracias requesting that the company add board members that are further removed and more independent from CEO Elon Musk.
In other words, the letter requests that the board add people who are more likely to add a contrary perspective to Musk’s perhaps overly idealistic approach to business.
The request seems to be at least partly a response to Tesla’s acquisition last year of SolarCity (run by Elon Musk’s cousins, and which Musk was Chairman of). That acquisition was somewhat contentious at the time — though, it seems fairly likely at this point that the potential business synergies used to justify the acquisition are real.
Teslarati provides more: “In addition to expanding the size of the Tesla board to include two new members that do not have ties with Musk, the group which manages a combined $721 billion in assets — Calstrs is the second largest pension fund in America — is also advocating for annual elections for all board members. Presently, only one third of the directors are elected each year. Calstrs is one of the founders of Investor Stewardship Group, which includes several other major investors such as BlackRock Inc., State Street Corp., Vanguard Group, and T. Rowe Price Group. In January, that group formulated a new policy position that supports annual elections for all board members as a way of increasing the accountability of directors to shareholders.”
The letter from the group 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.”
Those lines are in reference to the fact that Tesla’s board includes Elon Musk’s brother, Kimball; the aforementioned Antonio Gracias (a private equity firm founder who is also a director at SpaceX); the SpaceX investor Ira Ehrenpreis; a former SolarCity chief financial officer, Brad Buss; another venture investor and fellow SpaceX director, Steve Jurvetson; and the chief operating officer of Telstra Corp, Robyn Denholm.
So, a lot of people who are intimately involved in Musk’s other main venture (SpaceX) as well.
Notably, a Tesla spokesperson provided a pretty interesting response to news of the letter that read: “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.”
So, it looks like there’s some fresh blood on the way, but Elon noted in a tweet that this was actually independently planned — not a result of the letter or investor pressure.
This investor group should buy Ford stock. Their governance is amazing …
— Elon Musk (@elonmusk) April 12, 2017
Besides, I already said we'd add more independent members during SCTY merger. Will announce soon, but this group has nothing to do with it.
— Elon Musk (@elonmusk) April 12, 2017
Last thing, Absolutely LAST thing Musk needs is a member nominated by a teacher’s pension fund. Omigawd! what a way to kill a great company and hamstring a genius.
Haha. Indeed.
Loved Elon’s response. Could have been much harsher.