An investor group wants Tesla Motors to shake up its board of directors after it was discovered six out of seven board members with the solar panel company have direct connections with Elon Musk, the CEO and chairman of both companies.
CtW Investor Group said the market’s “hostile reaction” to the SolarCity deal was induced, in part, by the group’s recognition that Donald Kendall, chief executive of investment management firm Kenmont, is the only person on the SolarCity board without deep-rooted ties to Musk.
“This is particularly questionable when six out of our seven board members have ties to SolarCity,” a CtW letter to Tesla noted. “This raises a serious question about whose interests the board is serving — the stockholders of Tesla or the stockholders of SolarCity.”
The group, which holds 200,000 shares of Tesla, also demanded Tesla add two permanent independent directors to the board, separate the company’s chairman and CEO roles, and called for two independent directors to review the proposed SolarCity merger deal.
Musk owns 19 percent of the electric vehicle company and 22 percent of solar panel producer.
Tesla blanched at the accusation that it’s board is not diversified enough.
“Before approving the proposal to SolarCity, it engaged in a careful review after which Tesla’s disinterested directors unanimously concluded that SolarCity is the most attractive asset in the solar market,” Tesla said in an email. “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.
The CtW letter also noted that Tesla should alter its corporate governance guidelines to forbid immediate family members of the senior executive team from concurrently serving on the board.
“To be clear, this step would require the resignation from the board of Kimbal Musk,” the letter added. Kimbal Musk is the brother of Elon Musk and CEO of Internet software company Medium.
Musk recused himself from the merger decision process and told reporters last week that fusing the two companies was “something that we have been thinking about and debated for many years.”
The Tesla’s acquisition of SolarCity does appear from an outsider’s perspective to be a family affair.
Lyndon Rive, Musk’s cousin is SolarCity’s chief executive officer. He told reporters that he would be recusing himself from the “decision-making process” as well, and said the offer to buy SolarCity represented a value of between $26.50 and $28.50 a share.
JB Straubel, Tesla’s co-founder and current SolarCity Board of Director, played a big part in designing Tesla’s electric vehicles, focusing on their batteries, motor, power electronics, as well as their software systems. Unlike Rive and Musk, Straubel has not announced a decision to recuse himself from the voting process.
The fusion of the two largest renewable energy companies comes as Tesla attempts to produce more than 400,000 Model 3 pre-ordered vehicles, which are not expected to be profitable until 2020. The company also recently launched a share sale to raise $1.7 billion for capital expenses.
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