Sen. Elizabeth Warren is again calling on the Securities and Alternate Fee to research whether or not Elon Musk’s dealings with Tesla board members have crossed the road from a CEO who solutions to impartial board members with the ability to rent and hearth the chief, to a CEO with a board in his thrall.
In a letter to SEC Chair Gary Gensler at this time, Warren raised a litany of issues about Musk, arguing that all the points must be probed by the SEC. Warren stated Musk treats publicly traded Tesla like an organization he owns outright when, in reality, shareholders personal Tesla. Musk, additionally a shareholder, owns 20.5% of the electric vehicle manufacturer. She stated that when Musk posted on X in January that he can be uncomfortable creating Tesla as a frontrunner in AI and robotics with out having a 25% stake within the firm, he was successfully opting Tesla out of considerable progress alternatives for the corporate, improperly placing the pursuits of Tesla under these of xAI, a startup he based in March 2023.
In response to that “threat” to Tesla, wrote Warren, the board—which incorporates Musk’s brother, Kimbal Musk, and Tesla’s former chief know-how officer, JB Straubel—remained silent. Administrators issued no feedback to make clear the character of Musk’s management of Tesla, the board’s impartial oversight, his possession stake within the firm, or its alternatives within the subject of AI, she stated.
Warren’s new urging comes at a murky time for Musk. Tesla inventory is down 30% this yr and Musk has confronted calls from investors to form up his act as a CEO. Nonetheless, Musk has an enormous fan base. At a latest Singularity College occasion the place Musk appeared on a video name with founder and director Peter Diamondis, Musk described his objective of reaching the moon after one other 5 or 6 house flights this yr. The viewers cheered after he knocked on his brow to keep away from jinxing himself.
However regardless of his followers, Warren and regulators have criticized Musk’s willingness to bend the norms for public firm CEOs. The SEC has beforehand investigated Musk or his public statements not less than 3 times. Warren additionally raised the monetary hyperlinks between Musk and a few of his board members, which embrace investments in a few of his non-public corporations. Warren beforehand wrote to Tesla board chair Robyn Denholm to inquire concerning the misappropriation of Tesla executives and assets to X after Musk’s $44 billion takeover of what was then known as Twitter in Oct. 2022. Warren stated Denholm by no means wrote her again.
Warren additionally complained that Tesla out of the blue reversed course and commenced paying for adverts on X after Musk purchased the corporate. “Mr. Musk has also created a pathway that would allow Tesla to channel money to X though paid advertising,” wrote Warren. “Musk acknowledged it was ‘ironic’ to change his stance only few months after buying Twitter, which is ‘highly dependent on ads.’”
Musk’s relationships with some board members return a decade or longer and Warren famous that the recent Delaware Chancery Court ruling that vacated Musk’s $56 billion compensation plan and known as into query the Tesla board’s independence additional underscored these worries.
“Despite the growing concerns posed by Mr. Musk’s conflicting roles at Tesla and his private companies, the Board appears to have taken no action to address these risks or protect its shareholders,” stated Warren. “By all appearances, it seems that the Board continues to operate as if Mr. Musk is the ‘Technoking’ who can do no wrong.”
An SEC spokesperson stated in an announcement to Fortune that Gensler would reply to members of Congress immediately.
Tesla didn’t reply to a request for remark.
