Tesla disclosed that four of its directors are to step down as part of a governance overhaul at the electric car maker, following criticism in recent months of the board’s failure to exert more control over chief executive Elon Musk.
The shake-up was announced late on Friday, and came after the company’s new independent chairwoman, Robyn Denholm, sounded out the company’s biggest investors about what changes they wanted to see.
As part of the overhaul, the company’s lead independent director, Antonio Gracias, who was previously responsible for board oversight of Mr Musk, has handed over his responsibilities to Ms Denholm with immediate effect, and is expected to leave the board next year.
Tesla’s board has been a perennial target of Wall Street activists, dating back to the company’s acquisition of SolarCity, a company where Mr Musk was the chairman and his cousin, Lyndon Rive, chief executive officer. It came under fire last year after Mr Musk tweeted, inaccurately, that he was close to a buyout of the company.
That led to a criminal complaint, later settled, from the Securities and Exchange Commission — though Mr Musk is now in talks with the SEC to try to resolve a second complaint, arising from his alleged failure to keep to the terms of the settlement.
The governance changes, if approved by shareholders at the company’s annual meeting on June 11, will see Tesla’s board reduced from 11 to seven members, with two directors stepping down this year and two in 2020. The departures will mainly involve people who have been close to Mr Musk since around the time of his arrival as Tesla’s CEO 11 years ago, giving more weight to newer appointees who have fewer ties.
Along with Mr Gracias, the departures include Brad Buss, a former SolarCity executive who has been a Tesla director for a decade, and Steve Jurvetson, a venture capital investor who had temporarily stepped back from the board after facing sexual harassment allegations.
The fourth director due to leave, Linda Johnson Rice, who was only appointed to the board two years ago, is head of Johnson Publishing, which filed for bankruptcy earlier this month.
In a filing with the SEC, Tesla said the departures were designed to streamline the board, cutting it back to the size it had been before an expansion in the past five years, as well as “increasing the proportion of newer directors with outside viewpoints to complement directors with a longstanding familiarity.”
The company revealed that Ms Denholm last month sounded out investors representing more than three quarters of its stock, leading to the changes. The proposals being put to shareholders include reducing the period each director serves before facing re-election from three years to two. That will give shareholders more direct control over the board, though it still falls short of the annual re-election that many corporate governance experts see as best practice.