One of the top investment funds in the world said Thursday that it refuses to invest in Tesla Motors because Elon Musk’s ethically compromised business is completely unacceptable.
“Tesla recently failed our screen, as the board structure and Elon Musk’s role within the business was not acceptable to us,” Mike Fox, the head manager at Royal London Sustainable World Trust, told reporters in an interview.
Musk chairs both Tesla and SolarCity and owns about 20 percent stock in each company.
“We’re looking for companies that have a positive impact on society, either through their products and services, or through showing leadership in managing their impact,” Fox added.
Fox’s group prides itself on investing in companies focused on environmental sustainability, as well as those that prioritize shareholder interest and good business ethics. If the companies do not meet these criteria, the fund typically excludes from its investment portfolio.
“Very soon after we screened it out, Mr Musk and Tesla bought a business that Mr Musk was also the chairman of. In a well governed business, that would not be allowed to happen,” Fox added.
The group’s decision was no doubt informed by the California automaker’s recent business stumbles, namely the company’s inability to turn a profit and its highly controversial move to merge with SolarCity, another company seemingly on the skids.
Goldman Sachs, for instance, reclassified the electric vehicle maker’s holdings Oct. 6 to “neutral” from “buy” in a note, adding that the SolarCity merger was one of the reasons for the downgrade. The fusion of the two Musk-chaired companies makes Tesla an extremely risky bet, according to the memo.
The bank ratcheted down its price target to $185 from a loftier $240, which helped send Tesla shares tumbling by as much as 4 percent.
Musk, for his part, recused himself from the merger decision process and told reporters in June that fusing the two companies was “something that we have been thinking about and debated for many years.”
Musk’s cousin, Lyndon Rive, is SolarCity’s chief executive officer. He also promised to recuse himself from the merger process.
And then there’s Tesla’s co-founder and current SolarCity Board of Director, JB Straubel, who played a big part in designing Tesla’s electric vehicles, focusing on their batteries, motor, power electronics, as well as their software systems.
Straubel, unlike Rive and Musk, is not announcing a decision to recuse himself from the voting process.
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