Tesla Inc.’s board of directors is facing pushback over a plan to reelect its chair and add a former executive to the board at its May 16 annual meeting, with leading proxy advisers raising doubts about their suitability.
(Bloomberg) — Tesla Inc.’s board of directors is facing pushback over a plan to reelect its chair and add a former executive to the board at its May 16 annual meeting, with leading proxy advisers raising doubts about their suitability.
Shareholders should vote against the reelection of Chairwoman Robyn Denholm due to governance concerns, proxy advisory firm Institutional Shareholder Services said in a report. Denholm, who is head of the audit committee, hasn’t effectively managed risks posed by Tesla executives using their stock as collateral for other loans and investments, ISS said.
Glass Lewis & Co., another influential adviser, said investors should approve Denholm but vote against the appointment of a former chief technology officer, J.B. Straubel. More time needs to pass between Straubel’s exit and his addition to Tesla’s board, according to the adviser.
The carmaker’s stockholders will gather for the meeting at the company’s factory in Austin later this month. Investors don’t have to follow the advice of the advisers, but often do. Tesla Chief Executive Officer Elon Musk has accused ISS and Glass Lewis of controlling the stock market.
Tesla didn’t immediately respond to an email seeking comment.
Stock Pledging
Denholm, 59, has served on Tesla’s board since August 2014. She became chair in November 2018 after Musk was forced to relinquish the role as part of his settlement agreement with the US Securities and Exchange Commission following a debacle in which he pledged to take the company private. Denholm lives in Australia and was previously the chief financial officer at Australian telecom company Telstra Corp.
Both Musk and his younger brother Kimbal Musk, who is also on the board, have pledged a portion of their Tesla ownership, which can cause a risk to the investments of outside shareholders. In Tesla’s most recent proxy, the company said that Elon Musk had “238,441,261 shares pledged as collateral to secure certain personal indebtedness” while Kimbal Musk had pledged 1,608,720 shares.
“The pledging activity at the company with the absence of a compelling rationale and lack of a more robust anti-pledging policy call into question the audit committee’s ability to effectively oversee risk,” said ISS.
Denholm and Musk are both up for reelection to three-year terms. Tesla has also nominated Straubel to the board to replace Hiro Mizuno, who is stepping down. Despite concerns by some investors about Straubel’s ability to be independent, ISS says that “support for Straubel is warranted.”
Read More: Tesla Nominates Co-Founder Straubel to Board of Directors
Glass Lewis said shareholders should vote against Straubel’s appointment because he only left Tesla three years ago. The adviser said a five-year standard is more appropriate.
“We do not believe that shareholders should consider this director to be independent at this time,” the Glass Lewis report said.
Tesla investors should also reject a shareholder proposal for the board to create a key-person risk report, the advisers said.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.