Tesla shareholders will hold their annual meeting in June to vote on several key decisions for the company. One of those decisions is whether or not to keep Elon Musk as Chairman of the Board. The proposal is extremely unlikely to pass, but still highlights Tesla's mounting pressure to produce for its shareholders.
The idea was put forward by Mr. Jing Zhao of Concord, CA, a shareholder activist who has created similar proposals for Apple and IBM. His concern is that with Musk also involved at SolarCity and SpaceX, he may not be able to serve as an independent chairman.
Tesla was under pressure recently to add some independent members to its board, but this is the first call to remove Musk entirely. Part of the proposal reads as follows:
“An independent chairman of the board of directors is the prevailing practice in the international market, such as in the United Kingdom. In the United States too, many big companies already have or began to have an independent Board Chairman. Tesla should not be exception.”
This vote certainly doesn't mean Musk could be kicked out of his own company though; his contract as CEO was recently renewed for another 10 years. Tesla's statement on the issue unsurprisingly urges shareholders to vote against the proposal.
The Board believes that the Company’s success to date would not have been possible if the Board was led by another director lacking Elon Musk’s day-to-day exposure to the Company’s business. In light of the significant future opportunities for growth and the careful execution needed in order for the Company to achieve it, the Board believes that the Company is still best served by Mr. Musk continuing to serve as Chairman. Moreover, the role of the Lead Independent Director protects the Company against any potential governance issues arising from a non-independent director serving as Chairman. This position is vested with broad authority to lead the actions of the independent directors and communicate regularly with the Chief Executive Officer. Additionally, the Company now has seven independent directors following the addition of two additional independent directors in July 2017.
As CEO and Chairman of the Board, Musk has led Tesla along an impressive set of milestones, but not without some missteps. Their stock has tripled in the last 5 years but is down recently due to poor Model 3 production numbers and a tanking credit rating. Musk has since been sleeping on the factory floor ahead of their next milestone in June.
Although Musk's removal from the board seems unlikely, if Tesla misses the June production numbers, we may be seeing more and more proposals like this.