Top Tesla Investors Favored Curbing Musk’s Role Pre Meltdown

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By Andrea Vittorio

At least three of Tesla Inc.'s top 10 investors voted to dial back CEO Elon Musk’s duties months before a string of controversies raised questions about his leadership.

Funds run by BlackRock Inc., State Street Corp.'s investment management arm, and Capital Group backed a shareholder proposal that would have forced the CEO to relinquish his dual role as chairman of Tesla’s board, according to voting records compiled by Proxy Insight. Some funds affiliated with BMO Financial Group also voted in favor of the proposal.

They were among some 16 percent of all Tesla investors who voted earlier this year to bring on an independent board chair. The failed proposal has taken on new relevance since Musk tweeted in August that he was considering taking Tesla private before abandoning the idea 17 days later. The tweet drew shareholder lawsuits and an investigation by federal securities regulators.

It also fueled calls for Tesla’s board to step up its oversight of the company’s CEO and largest shareholder. So have more recent incidents involving Musk’s use of the sleep aid Ambien and marijuana.

“The events of the last few months have only reinforced the rationale for that vote,” said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.

Musk has said he has no plans to relinquish his dual roles. Tesla’s board had recommended that shareholders vote against the proposal, saying its lead independent director protects the company against any potential governance issues arising from having Musk as CEO and chairman.

‘We Fully Support Elon’

“The board believes that the company’s success to date would not have been possible if the board was led by another director lacking Elon Musk’s day-to-day exposure” to Tesla’s business, the board wrote in a proxy statement issued before the vote.

More recently, Tesla directors issued a statement saying “we fully support Elon” continuing to lead the company.

Spokespeople for BlackRock, State Street, and Capital Group said they don’t comment on votes at specific companies. A BMO spokeswoman declined requests for comment.

“Our approach to engaging with companies and proxy voting activities is consistent with our commitment to drive long term shareholder value for our clients,” BlackRock said in a statement. “With each company, we take a case-by-case approach to how we engage and vote because doing so encourages change over time and promotes responsible business practices that align with the financial interests of our clients.”

State Street considers independent board leadership key to good corporate governance. The firm supported 10 of 44 shareholder proposals seeking an independent chairman at U.S. companies in 2017.

Pay Package

One major investor that didn’t back the independent chairman proposal was Vanguard Group, though its funds did protest Musk’s unprecedented billion-dollar pay package by voting against it. BlackRock and other shareholders approved the pay plan by a wide margin in March.

At least some funds at State Street, Capital Group, and BMO also voted against the pay package, which is tied to financial milestones over the next decade that would make the electric-car maker one of the world’s most valuable companies. It doesn’t include any guaranteed salary or cash bonuses.

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

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