Tesla shareholders will consider a motion to oust Elon Musk as chairman of the board at the company’s annual meeting in June, just weeks after the board approved a massive compensation package for him.
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The proposal from shareholder Jing Zhao, who owns 12 shares of Tesla’s common stock, calls on the board of directors to replace Musk with an independent director. In addition to serving as chairman of the board, Musk is Tesla’s CEO. Shareholders will vote on the proposal on June 5.
“Although the current leadership structure, in which the positions of Chairman and CEO are held by one person, could provide an effective leadership for Tesla at the early stage, now in this much more highly competitive and rapidly changing technology industry, it is more and more difficult to oversee Tesla's business and senior management (especially to minimize any potential conflicts) that may result from combining the positions of CEO and Chairman,” Zhao wrote in a statement on his proposal.
Zhao added that the appointment of an independent chairman would adhere to the “prevailing practice in the international market. … Tesla should not be the exception.”
Tesla shareholders approved a new $2.6 billion compensation package for Musk in March. The package will grant Musk stock awards in 12 increments based on the company’s projected rise in market value from $55 billion to $650 billion over the next 10 years. Under the deal’s terms, Musk must remain as Tesla CEO or serve as executive chairman and chief product officer to receive the awards.
The electric-car maker’s stock has been under pressure in recent days amid growing concern about its ability to meet production benchmarks for its flagship Model 3 electric sedan. Tesla has also been embroiled in a public war of words with federal safety officials over an investigation into a fatal car accident in California involving one of its vehicles.
Tesla’s board of directors, which is against the proposal, supported Musk as chairman in a statement.
“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 the Company’s business,” the board said. “In light of the significant future opportunities for growth and the careful execution needed in order for the Company to achieve it, the Board believes that the Company is still best served by Mr. Musk continuing to serve as Chairman.”