Tesla Inc. (TSLA) continues to draw ire from investors, a few of whom are demanding that three board members be replaced, and Elon Musk, the chair of the board, be booted out. (See also, Is the Tesla-Panasonic Battery Deal in Trouble?)
Amid a sluggish pace of production of its Model 3 electric car, Tesla's shareholders are becoming more uneasy and demanding as the company faces increased scrutiny. A union-affiliated, activist pension fund investor – CtW Investment Group – recently sent a letter to Tesla shareholders requesting the replacement of three key board members, according to CNBC.
The three directors in question are Antonio Gracias, Kimball Musk and James Murdoch. The re-election vote on the three directors is slated for the upcoming annual meeting on June 5. The letter mentions the background of the three directors, specifically citing their lack of experience and knowledge in the automotive industry, and their lack of independence from chair and CEO Elon Musk, implying that Musk is the single decision making authority in Tesla.
Gracias was an investor in Paypal where Musk also benefited from early investments. He was also an investor in SolarCity which Tesla bought in 2016. He continues to own a majority stake and is a board member and director in SpaceX, another Musk company.
Kimball Musk is Elon Musk's brother with no auto industry experience, and CtW alleges his inefficiency “as a public company director at Chipotle.”
James Murdoch is the CEO of 21st Century Fox (FOXA). He lacks automotive field experience, and the CtW letter alleges his involvement “in multiple corporate scandals at Fox and News Corp.”
The letter specifically mentions the company's deteriorating financial performance: losses have increased to the tune of 19 percent of revenue, and the company's cash burn has shot up significantly in its most recent four quarters. Tesla posted its worst-ever quarterly operating loss for the January-March period.
The letter also cites Musk's much-publicized blunt refusal to entertain a question from an analyst and saying "boring bonehead questions are not cool."
Call to Remove Elon Musk as Chair
Another separate proposal seeks to remove CEO Elon Musk from his role as chair. The proposal was initiated few days ago by a lesser known shareholder named Jing Zhao of Concord, California who owns only 12 shares of Tesla, reports Reuters.
In its proxy statement filing, Tesla has recommended retaining the existing board members, and the board claims that “its structure is consistent with majority practice at large public companies and it already has seven independent directors.”
However, in its recent quarterly report, it acknowledged the risk and dependency on the largest stockholder, Elon Musk, who owns more than 20 percent of Tesla shares. The risk statement reads, “We are highly dependent on the services of Elon Musk, our Chief Executive Officer, chair of our Board of Directors and largest stockholder. Although Mr. Musk spends significant time with Tesla and is highly active in our management, he does not devote his full time and attention to Tesla. Mr. Musk also currently serves as Chief Executive Officer and Chief Technical Officer of Space Exploration Technologies Corp., a developer and manufacturer of space launch vehicles, and is involved in other emerging technology ventures.” (See also, Is Elon Musk Making Things Worse for Tesla?)
Tesla shares were trading at $303.60 during pre-market hours on Monday morning.