investors.”[1] Nasdaq rules require that a “majority of the board of directors must be comprised of Independent Directors,”[2] meaning they must not be people who have a relationship which, “in the opinion of the Company's board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.”[3] This important requirement exists so that shareholders can “have confidence that individuals serving as Independent Directors do not have a relationship with the listed Company that would impair their independence.”[4] According to Nasdaq guidance, this obligation also gives the Tesla Board the “responsibility to make an affirmative determination that no such relationships exist.”[5]
The composition of Tesla’s eight-person Board[6] raises concerns about whether it is in violation of the majority independent director requirement. As the founder and CEO of Tesla, Mr. Musk exercises significant control over the day-to-day management of the company, describing himself as a “nano-manager” who “can’t find people to delegate to,” most recently instituting a policy requiring that all Tesla hires be personally approved by him.[7] As discussed above, Mr. Musk has regularly used Tesla resources for his other ventures, including SpaceX and Twitter, and may even be a controlling shareholder of Tesla.[8] Tesla’s own 10-K filings admit the company is “highly dependent” on Mr. Musk and that he “spends significant time with Tesla and is highly active in [its] management.”[9] Mr. Musk has stated he “handpick[ed]” Tesla’s Chair Robyn Denholm and bragged that he “can just call for a shareholder vote and get anything done that [he] want[s].”[10] Given Mr. Musk’s control over Tesla, any close relationship between a Board member and Mr. Musk might constitute a “relationship with the listed Company that would impair [the member’s] independence.”[11]
Members of the Board with known ties to Mr. Musk or Tesla include Mr. Musk himself; Mr. Musk’s brother, Kimball Musk; Ira Ehrenpreis, a “longtime friend” of Mr. Musk who helped design his record-breaking compensation package and explored limiting the disclosure of its details to investors;[12] James Murdoch, Mr. Musk’s friend of almost 20 years who vacations with
- ↑ U.S.C. 78u(f).
- ↑ Nasdaq Rule 5605(b)(1).
- ↑ Nasdaq Rule 5605(a)(2).
- ↑ Nasdaq Rule IM-5605.
- ↑ Id.
- ↑ Tesla Inc., “Corporate Governance,” https://ir.tesla.com/corporate.
- ↑ Business Insider, “Elon Musk just told Tesla staff he wants to personally approve all new hires. Here's a look into his management style at Twitter, Tesla, and SpaceX over the years,” Sarah Jackson, May 16, 2023, https://www.businessinsider.com/elon-musk-management-leadership-style-at-tesla-spacex-2022-4.
- ↑ Cadwaladar, “M&A Update: Delaware Chancery Court Finds Elon Musk May Be Controlling Stockholder of Tesla Motors,” April 16, 2018, https://www.cadwalader.com/resources/clients-friends-memos/delaware-chancery-court-finds-elon-musk-may-be-controlling-stockholder-of-tesla-motors.
- ↑ Tesla Inc., Form 10-K, December 31, 2022, https://www.sec.gov/Archives/edgar/data/1318605/000095017023001409/tsla-20221231.htm.
- ↑ CBS News, “Tesla CEO Elon Musk: The 60 Minutes Interview,” Lesley Stahl, December 9, 2018, https://www.cbsnews.com/news/tesla-ceo-elon-musk-the-2018-60-minutes-interview/.
- ↑ Nasdaq Rule IM-5605.
- ↑ Fortune, “Elon Musk’s longtime friend defends his role designing the Tesla CEO’s $55 billion pay package: ‘He has been as hard working a CEO as there can be,’” Randall Chase, November 14, 2022, https://fortune.com/2022/11/14/elon-musk-friend-tesla-compensation-trial-ira-ehrenpreis-55-million/.
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