Tesla Shareholders Votes to remove Elon Musk as Chairman

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It was just a few months ago that Tesla signed Elon Musk to hang in there as CEO for another ten years. Since then, the electric vehicle company has been going through some tough time and when shareholders hold their annual meeting in June, they’re set to vote on a proposal to get rid of Musk from his role as chairman.

Electrek reports:

An owner of 12 Tesla shares named Mr. Jing Zhao from Concord, CA put the proposal together. He is a well-known shareholder activist who has previously pushed other proposals at companies, like Apple and IBM.

He made the argument that combining the role of chairman and CEO could have been beneficial at an early on stage at Tesla, however not given that the business is maturing. He specifically brought up Musk’s involvement with SolarCity and SpaceX as examples why he can’t be considered as an unbiased chairman.

The shareholder added in his proposal:

“An unbiased chairman of the board of directors could be the prevailing practice in the international market, such as in the United Kingdom. In the United States too, many big companies have or began with an independent Board Chairman. Tesla shouldn’t be exception.”

The proposal was with a statement from Tesla’s board that disagreed with the proven fact that an unbiased chairman is needed. The board argued that “the Lead Independent Director protects the Company against any potential governance issues arising from the non-independent director serving as Chairman.” Additionally, it credited Musk’s “day-to-day exposure to the Company’s business,” as the key to its success.

It seems unlikely this vote can lead to Musk being replaced, and no one’s saying he should no more be CEO. In fact, his contract even gave him the possibility of becoming chief product officer and executive chairman, he’d oversee whoever will be chosen as the new CEO. Financially, the agreement is a good deal for Tesla because Musk has going to some pretty ambitious targetsin the coming years.

Hitting targets hasn’t been Musk’s strong suit lately. Tesla’s biggest issue at this time is that it failed going to its goal of producing 2,500 Model 3s weekly in the first quarter of 2018. Musk went into damage control mode, vowed to begin sleeping on the factory floor, and announced production would go 24/7 with another goal being 6,000 Model 3s rolling off the assembly line weekly by June.

Still, reports that investors are losing patience continue to come in. Within the last few month, Tesla’s stock price has nosedived from $304 per share to $250. It’s currently sitting around $286 at the moment. One analyst recently predicted that Tesla’s stock will drop down to $84 a share by 2019 because of the intense competition it faces.

On Thursday, Musk surprised some investors when he explained that Tesla won’t accept any new capital this year. Your decision comes at the same time when Tesla’s credit rating is in the trash, and the business continues plowing through cash.Bringing in more investment might have alarmed shareholders as well, but with major projects just like a semi-truck and an SUV in the pipeline, a lack of capital could also mean missing future goals.

Again, Musk being removed as chairman seems unlikely, but when Musk fails going to his goal for June, some might notice it as a way to signal that fresh blood are certain to get things on track.

 

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