Last year when Tesla CEO Elon Musk disclosed the company’s intention to acquire solar installer SolarCity, the board of directors came under fire for having close relations with him. At that time, many influential investors pushed the car maker to add two independent board members who have no relation to Musk to Tesla’s board. Now it seems the company is planning to do it.

Tesla Board
Blomst / Pixabay

Why investors want independent board members

Several investors, including the California State Teachers’ Retirement System and four other investor groups, were not happy with multiple board members having close ties with the CEO. Thus, these strong investors were pushing the automaker to establish an even more powerful board of directors who are free and independent from the influence of Musk.

In a phone interview with Bloomberg, Etelvina Martinez, corporate governance manager at CtW Investment Group and an investor who is among the five to sign the letter, said that getting independent people on the board is essential.

“Shareholders need to be able to hold management accountable. While the stock price is doing extremely well, there are still concerns about corporate governance,” Martinez said.

Now the electric car maker says it is actively searching for independent board members and could announce the names “soon.”

Tesla’s boards include Kimbal Musk, Elon Musk’s brother; Brad Buss, former chief financial officer at SolarCity; and Steve Jurvetson, Antonio J. Gracias, and Ira Ehrenpreis, all of whom were investors in SpaceX (of which Musk is also chief executive officer).

Tesla searches for new directors

A group of investors had signed a letter to Tesla director Antonio Gracias calling for new board members.

The letter, which was obtained by Bloomberg, says, “Directors should be held to a higher standard of independence given the conflicts of interest that permeate this board. A thoroughly independent board would provide a critical check on possible dysfunctional group dynamics, such as groupthink.”

Tesla has now responded to the request in an emailed statement sent to Bloomberg, saying that it has already been looking for new board members for several months. Further, the email read that the company expects to announce new members “fairly soon.”

“We regularly engage with our shareholders and value their feedback,” the email read.

It is not certain whether the automaker will be removing any members, but so far, there has been no talk about it, which makes it seem unlikely. We may learn more about the new members when the automaker holds its annual shareholders’ meeting, which is usually held in June, notes Electrek.

The group of five investors, which collectively holds more than $720 billion in assets, is pushing for yearly director elections as well instead of votes staggered every three years.

On Tuesday, Tesla shares closed down 1.18% at $308.71. Year to date, the stock is up more than 44%, while in the last year, it is up more than 23%. The stock has a 52-week high of $313.73 and a 52-week low of $178.19.