These days, Elon Musk is synonymous with a few different things, but likely first and foremost on many people’s minds is Tesla. Musk has served as CEO and Chairman of the Board for the company since 2004 and has presided over a generally impressive period of growth of the brand. One stockholder seems to think that Tesla would be better off with someone else as Chairman, and will have a proposal at this year’s annual stockholders meeting to determine whether or not Elon Musk should be replaced as Chairman of the Board.
The stockholder —Jing Zhao from Concord, CA, who owns 12 shares of Tesla stock — outlined his beliefs on the proposal, which along with pointing to Musk’s attention to other projects such as SpaceX, The Boring Company, etc. had this to say:
An independent chairman of the board of directors is the prevailing practice in the international market, such as in the United Kingdom. In the United States too, many big companies already have or began to have an independent Board Chairman. Tesla should not be exception.
The board of directors is allowing the vote, though as shouldn’t be a surprise to anyone, is asking stockholders to vote against it. Their full response was included in a proxy statement sent to all shareholders ahead of the meeting and vote:
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 Independen t 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 % 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.
While there’s likely some merit to Mr. Zhao’s request, I tend to think that the board probably knows what they’re talking about in their desire to keep Musk as Chairman of the Board. We’ll have to wait and see how the vote turns out before we’ll know whether or not Musk needs to find something else to take up his obvious amounts of free time (just to be absolutely clear, that’s sarcasm. I have no idea how the dude does all that he does already).
Last Updated on April 27, 2018.