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Tesla Board needs overhaul, says activist



An activist firm representing the shareholders of Tesla Inc. has insulted the electric car maker claiming that it has strayed from the path of profit and is pushing for a major overhaul of Elon Musk's executive board.

CtW Investment Group, works with union pension funds, which are Tesla investors, who manage more than $ 250 billion, and rejects the re-election of three board members who attended the Tesla annual meeting on May 5 June vote. The company is inviting shareholders to vote against Antonio Gracias, a private equity investor and Tesla's leading independent director; Kimbal Musk, Elon's brother; and James Murdoch, CEO of Twenty-First Century Fox Inc.

"Tesla has failed to reach critical production milestones and has thus greatly reversed its earlier progress toward profitability," writes Dieter Waizenegger, CtW's director , in a letter firm plans, Wednesday to file with the Securities and Exchange Commission. "Instead of recognizing the need for independent and effective leadership, Tesla has re-nominated three directors who exemplify the company's lack of development."

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The letter escalates criticizing a board that CtW and several investors have criticized for holding onto Musk, Tesla's CEO. The company burnt in nearly $ 4 billion last year, while expanding the Model 3, which will be the first mass-produced vehicle. The sedan has missed several production targets and raised concerns about whether the company has enough cash.

Wide-Ranging Concerns

While praising Tesla as a "successful innovator with an environmental mission," CtW's Waizenegger writes that the company's prospects for continued success are "thinner than ever" and the board must "to increase his game".

The far-reaching letter raises concerns, including Musk's militant earnings appeal with analysts last week, [1

9659013] safety issues at Tesla's Californian assembly plant, fatal accidents involving the autopilot driver assistance system and litigation related to the controversial acquisition of SolarCity Corp. Through the Group

"In response to these significant financial and operational challenges, The Tesla Board has exaggerated appreciation to Chairman and CEO Elon Musk," writes Waizenegger. "Mr. Musk's peripatetic focus – he's also the CEO of SpaceX, an advocate for Hyperloop, and apparently he's starting a candy business – is being tightened rather than contained by a board whose majority of members are family or nonmembers.Tesla ties in with him , has no industry experience and has no experience with an independent executive in a public company. "

Gracias, a Tesla Director since since 2007, has both personal and professional connections to Musk, 46. The founder of Valor Equity Management Invested in Paypal Inc., which co-founded Musk, and participated with Valor in rounds of financing and a debt relief that Tesla held before the IPO in 2010. Musk gave Gracias the second Roadster sports car the company built. He is also on the board of Space Exploration Technologies Corp.

"The senior independent director should direct a process of renewal and modernization of the board by recruiting well-qualified, diverse and independent directors with a combination of industry and business governance experience," writes Waizenegger. "Given his many years of conflict, we see no chance for Mr. Gracias to change course and initiate this long overdue process."

CtW also suggests Tesla for the re-nomination of Kimbal Musk, 45, who lacks relevant industry experience or "a track record of an effective public-sector board," Waizenegger said. He became 2013 director of Chipotle Mexican Grill Inc., and shareholders rejected the company's compensation plan for next year. The stock coincided during a prolonged food safety crisis.

"We would find it inexplicable if Tesla were something of a well-run public company," Waizenegger said of Kimbal Musk's re-election.

CtW was among the group of influential investors who urged Tesla in April 2017 to appoint new directors who had no connection to Elon Musk, raising concerns over the lack of independence on the board. The car maker appointed longtime media manager James Murdoch, the son of executive chairman of News Corp., Rupert Murdoch; and Linda Johnson Rice, chairman of Johnson Publishing Co.

Waizenegger listed scandals involving companies including Murdoch's Computer Hacking Episode by News Corp. and Twenty-First Century Fox sexual harassment. Murdoch does not seem to have any experience in manufacturing or mechanical engineering, writes Waizenegger.

"Given that the simultaneous appointment of Linda Johnson Rice gave the Board significant media experience," writes Waizenegger, "it is not clear why Tesla would do so. I need two directors with media but no automotive background." [19659008] Track Record

CtW has organized campaigns to vote against directors for lack of independence and diversity, including Urban Outfitters Inc. and Tiffany & Co. last year. At Urban Outfitters' last May meeting, as many as two-thirds of the outside shareholders voted against a director rejected by the company and investors such as Norges Bank and CalSTRS joined CtW in opposition. Tiffany's shareholder response was more subdued, but the company has since appointed a new CEO and new chairman.

Waizenegger describes Tesla's board as "leftover" from the earliest days of the company, when the automaker was a private company under the control of Musk.

"Now that Tesla IPO is eight years in the past, a modernization of the Tesla board is long overdue," he writes.

– With the support of Emily Chasan [19659043]
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