An investor group called on Tesla Motors Inc (NASDAQ:TSLA) on Tuesday to add two independent directors to its board. CtW Investment Group asked the automaker to separate the roles of chief executive and chairman as it underlined the dominance of Tesla CEO and founder Elon Musk in the wake of the proposed bid for SolarCity. Musk is also the largest shareholder and chairman of SolarCity.
CtW demands five assurances
CtW works with union-based pension funds and holds 200,000 shares of the U.S.-based electric car company. In a letter to the EV firm, CtW demanded the implementation of five steps that it says would remedy Tesla’s underlying governance deficiencies.
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CtW wants two independent directors to form a special committee and review the proposed SolarCity deal. The firm also wants declassification of the board to give stockholders an actual say on the election of all directors. To forbid immediate family members of board members from serving concurrently on the board, CtW called for a revision of the corporate governance guidelines and separating the chairman and CEO roles.
In the letter, CtW Executive Director Dieter Waizenegger wrote that the fiercely negative reaction to the proposed transaction underscores their continuing concern about governance at the company and emphasizes the flawed corporate governance process.
“We believe the board of directors at Tesla Motors Inc (NASDAQ:TSLA) must be restructured in order to insure that stockholder interests are protected during this proposed acquisition and going forward,” the executive said.
Tesla and SolarCity: a complex relationship
Because of ties to Musk or Tesla, five of SolarCity’s eight-member board recused themselves from voting on the deal. Also SolarCity formed a special committee of just two directors: Nancy Pfund and Donald Kendall. The directors will evaluate the offer. Kendall, CEO of investment management firm Kenmont, is the only member of SolarCity’s board with no direct ties to Tesla Motors Inc (NASDAQ:TSLA).
Transactions like the proposed SolarCity bid give rise to the self-dealing behavior of the complex web of relationships among the companies controlled by Musk or his family members and Tesla Motors Inc (NASDAQ:TSLA) board members, said Waizenegger.
Last week, the automaker proposed an up to $2.8 billion all-stock acquisition of Solar City. On June 21, the day after Musk declared the SolarCity proposal, shares of the electric car making giant fell by as much as 10%. As of now, there have been no comments from Tesla about the matter.
On Tuesday, Tesla shares were up 1.63% at $201.79. Year to date, the stock is down by over 15%, while in the last year, it is down by over 24%.