Tesla shareholders are being urged to vote against the re-election of three board members at next month’s annual meeting, including CEO Elon Musk’s brother Kimbal. The proposal, put forward by the CtW Investment Group and detailed in an SEC filing Wednesday, criticizes Kimbal as having “no professional experience in the auto industry.”
“While Tesla acknowledges that Kimbal Musk is not an independent director, the board has nevertheless re-nominated him: we view this decision, following both Tesla’s poor first quarter and the court’s citation of extensive board conflicts, all but inexplicable,” the proposal letter from CtW executive director Dieter Waizenegger reads. “Or, rather, we would find it inexplicable if Tesla were anything like a well-run public company.”
Stockholders are set to vote on proposals like these and more on June 5. Despite first-quarter results earlier this month where Tesla announced Model 3 production moved past the 2,000-per-week mark, Musk made headlines by dismissing analyst questions as “boring” and “bone-headed.” The CtW proposal described Musk’s refusal to answer questions as “startling,” and noted a four percent year-over-year drop in stock price as emblematic of “deteriorating financial performance.”
CtW, which manages more than $250 billion as part of a union pension fund, also recommends removing venture capital investor Antonio Gracias and 21st Century Fox CEO James Murdoch from the board of directors. It’s claimed Gracias has multiple ties to Elon that means he “lacks the independence to serve as Lead Independent director” — including receiving the second Roadster ever made — and Murdoch “lacks relevant industry experience, and has been deeply implicated in multiple corporate scandals at Fox and News Corp.”
Kimbal has served on Tesla’s board since April 2004. The proposal mentions his personal links with several members of the board. He’s the brother of Elon Musk, cousin of SolarCity co-founders Peter and Lyndon Rive (a company that merged with Tesla in November 2016), and an investor in two Valor venture capital funds managed by Tesla board director Antonio Gracias.
The proposal criticizes Kimbal’s lack of experience in the auto industry, as well as his role as an independent director at Chipotle Mexican Grill. Since taking up the position in 2013, Chipotle shareholders have rejected an executive pay plan put forward by the company, and the company has suffered a major health and safety crisis that made international news. The proposal describes Kimbal’s renomination as emblematic of the problems with Tesla’s board, as directors are unwilling or incapable of contradicting Elon and changing the board renewal process.
It’s not the only high-profile proposal for the meeting. Shareholder Jing Zhao also put forward a proposal to replace Elon as chairman with an independent director, while keeping him as CEO. Zhao’s proposal describes such an arrangement as “the prevailing practice in the international market,” but the board has recommended a vote against the idea as it “would not serve the best interests of the Company or its stockholders.”
The annual meeting is set for 2:30 p.m. Pacific time, at the Computer History Museum in Mountain View, California. Tesla will host a webcast to stream the event.
Inverse has contacted Tesla for comment on CtW’s proposal.