Before Tesla The annual general meeting is held in June, and shareholder Jing Zhao has submitted a proposal to replace chairman Elon Musk with independent directors. Tesla CEO Elon Musk has served as chairman of the board since 2004.
“While the current leadership structure (with one individual serving as Chairman and CEO) could have provided Tesla with effective leadership in its early stages, it is now more difficult to oversee Tesla in a more competitive and rapidly changing technology industry. Tesla's business and senior management (in particular to minimize any potential conflict), which may result from combining the positions of CEO and chairman," Zhao wrote in his proposal.
Zhao, who owns 12 shares of the company's common stock, also pointed to Musk's positions at SolarCity and SpaceX, and how Musk's involvement led to conflict. But the chances of that happening are slim.
The board has objected, recommending a vote on the proposal. In its statement, the board said Tesla's success would not have been possible without Musk at the helm of the board and the company itself.
"Given the significant opportunities for future growth and the prudent execution opportunities required by the company to achieve this, the board believes it is best for the company to remain with Mr. Musk as chairman," the board said. “Additionally, the lead independent director role protects the company from any potential governance issues with any non-independent director serving as chairman. The position has broad authority to lead the conduct of independent directors and communicates regularly with the CEO. Additionally, in July 2017 After adding two independent directors last month, the company currently has seven independent directors.”
I reached out to Tesla for comment, and the company directed me to participate in the board's response. This is complete:
The Board believes that the company's success would not be possible if the Board were led by another director who lacked Elon Musk's day-to-day exposure to the company's business. Given the significant opportunity for future growth and the need for careful execution by the company to achieve this goal, the Board believes that the company will continue to be chaired by Mr. Musk.
Additionally, the role of independent directors protects the company from potential governance issues with any non-independent director serving as chairman. This position has broad authority to lead the conduct of independent directors and communicates regularly with the CEO. In addition, after two new independent directors were added in July 2017, the company now has seven independent directors. The Board of Directors considers that the existence of the Independent Director of Independent Directors and the other six Independent Directors ensures that the Board acts independently. The current board structure is also in line with the majority practice of large public companies: According to the 2017 Spencer Stewart Board Index, 72% of companies in the S&P 500 do not have an independent board chair.
Proponents acknowledge that a combined CEO and chairman is an effective form of leadership for an early-stage company until it faces increasing competition and rapid technological change. The Board believes that at a time when companies must rapidly adapt to constant change and external pressures, Board leadership needs to be aligned with the company's operations. Despite our achievements to date, the company is still in a development phase and in order to achieve our long-term goals we must execute well on our development goals and the separation of the roles of CEO and Chairman at this time is not in the best interest of the company or its shareholders.
Zhang Yue 