Tesla Shareholders Reject Corporate-Governance Measures -- Update
June 11 2019 - 7:39PM
Dow Jones News
By Tim Higgins
Tesla Inc. shareholders rejected changes at the electric-car
maker aimed at improving corporate governance months after Chief
Executive Elon Musk was accused by regulators of misleading
investors with statements about a plan to take the company
private.
One proposal to shorten board members' terms to two years from
three failed to get enough votes, as did another measure proposed
by the board of directors to change a supermajority voting
requirement to a simple majority.
The Silicon Valley company, founded in 2003, has faced criticism
from shareholder groups that its board isn't independent enough
from Mr. Musk. When the board proposed the changes in April, it
said the effort was intended to address concerns raised by
institutional investors.
While Tesla doesn't have a dual-class of stock similar to
Facebook Inc. or Alphabet Inc. that provides Mr. Musk controlling
power over the auto maker, the supermajority vote requirement
effectively gives him a veto over shareholder proposals. Mr. Musk,
who helped Tesla get going as its largest initial investor before
taking over as CEO in 2008, remains the largest individual
shareholder with about a 20% stake. His brother, Kimbal Musk, is
also a shareholder and member of the board.
Proxy adviser Glass Lewis & Co. recommended shareholders
vote in favor of the proposals, saying in a report that
supermajority vote requirements "act as impediments to takeover
proposals and impede shareholders' abilities to approve ballot
items that are in their interests. This, in turn, degrades share
value."
Tesla has weathered increased criticism about its governance
since last summer, after Mr. Musk surprised investors with messages
on Twitter that he was considering taking the company private and
had funding secured to do so. Shares soared only to fall in the
following days as it became clear Mr. Musk's proposal wasn't
finalized.
He later faced claims by the Securities and Exchange Commission
that he improperly misled investors with his tweets. He settled
with regulators last year, agreeing to pay a fine, step down as
chairman and accept oversight of his public statements.
As part of the settlement, Tesla named director Robyn Denholm,
then financial chief of Australian telecommunications company
Telstra Corp., as Tesla's new chairman and agreed to appoint two
new directors. Kathleen Wilson-Thompson, global head of human
resources for Walgreens Boots Alliance Inc., and Oracle Chairman
Larry Ellison were named to those new roles in December.
Earlier this year, the SEC sought to hold Mr. Musk in contempt
over claims he violated their deal with tweets he made about
production. Regulators dropped their motion after coming to a
renewed oversight agreement with Mr. Musk.
Tesla said Tuesday at its annual shareholder meeting near its
Palo Alto, Calif., headquarters that director Ira Ehrenpreis, an
early Tesla investor, and Ms. Wilson-Thompson were re-elected to
the board. Brad Buss and Linda Johnson Rice didn't seek
re-election, narrowing the board to nine members from 11.
Write to Tim Higgins at Tim.Higgins@WSJ.com
(END) Dow Jones Newswires
June 11, 2019 19:24 ET (23:24 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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