Elon Musk has brushed off doubts about his plan to marry Tesla Motors Inc. and SolarCity Corp. with reassurances the idea is sound, including that his board is unanimously behind him.
That’s hardly surprising. Six of Tesla’s seven directors are Musk insiders with SolarCity ties, a setup often criticized as overly cozy. “You can’t have a board that is just an echo chamber,” said Vivek Wadhwa, a professor at Carnegie Mellon University and longtime critic of boards’ lacking diversity.
Now some Tesla shareholders are saying a Tesla-SolarCity combination could finally bring changes to the boardroom, presumably one with slots for more directors. “The upcoming merger is an opportunity to rethink the board’s structure,” said Dieter Waizenegger, executive director of CtW Investment Group, representing pension funds that hold Tesla shares. Size, though, isn’t the main issue for CtW. “A bigger board is not necessarily a better board,” Waizenegger said, “if it is stacked with family and friends.”
CtW wants Tesla to add two independent directors, and to rewrite the rules so immediate family members can’t serve concurrently, as Musk and his brother Kimbal Musk do now, and to prevent the same person from being chief executive officer and chairman, as Musk is.
Many Connections
There’s no shortage of advice about what the electric-car maker should do to make the board healthier, in critics’ opinions, for a company with a $30 billion market value. Charles Elson, head of the John L. Weinberg Center for Corporate Governance at the University of Delaware, said with just seven members the board looks like one belonging to a fledgling start-up.
Elson agrees the CEO and chairman’s jobs should be separated. “The person being monitored by the board shouldn’t be chairing it,” he said. Wadhwa, a distinguished fellow at Carnegie Mellon’s College of Engineering at its Silicon Valley campus, recommends more women and people from foreign markets where Tesla does business. At the moment, he said, Tesla is similar to Silicon Valley tech companies where “boards are basically boy’s clubs.”
What are the chances any of that will happen? Tesla directors didn’t respond to requests for comment, nor did the company.
Source: Bloomberg.com
