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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