Tesla shares fell nearly 4% on Monday after media revelations about Musk’s unusually close personal and financial ties to members of the automaker’s board of directors raised concerns on Wall Street about a lack of real oversight of one of the world’s most important companies. Strong CEO.
The news broke less than a week after a Delaware Chancery Court judge blocked Musk’s unprecedented multibillion-dollar compensation package, saying the board’s approval process was “seriously flawed” because of how many people involved ” is indebted to Musk and his deep relationships with ostensibly independent board members have come under new scrutiny.
Throughout her ruling, Judge Kathaleen McCormick noted that the people who were supposed to negotiate Musk’s pay on Tesla’s behalf were, in fact, far from independent. Musk has extensive ties with board members, including Ira Ehrenpreis, who personally and through his business has invested “tens of millions of dollars” in Musk-controlled companies. Ehrenpreis is also a close friend to Kimbal Musk, Elon’s brother, who is also a Tesla board member. Ehrenpreis attended Kimbal’s wedding in Spain, and also invested in Kimbal’s restaurant company, The Kitchen Group.
Another member of the compensation committee, Antonio Gracias, has both business and personal ties with the CEO. McCormick noted that Gracias and Musk had spent Christmas together, and even vacationed with Musk’s family “on a regular basis,” taking numerous vacations with Musk’s cousins, as well.
The relationship is not strictly limited to vacations, however, with Gracias having acquired “dynastic or generational wealth” from having invested in Musk’s companies.
In another instance, the judge emphasized the role of Tesla’s general counsel Todd Maron — who was previously Musk’s divorce lawyer — in advising Tesla’s board and compensation committee. Maron was “totally beholden to Musk,” McCormick wrote in her ruling last week, adding that Maron’s admiration for Musk “moved him to tears” during both his deposition and in trial testimony.
Maron’s team prepared “an aggressive timeline for approving a compensation plan,” McCormick wrote in her more than 200-page ruling. The break-neck speed of the process “reflected a reckless approach to a fiduciary process.”
Robyn Denholm, the Tesla board chair, doesn’t appear to have had any personal relationship with Musk outside of her service on the board, McCormick wrote. Though the vast majority of Denholm’s wealth — including what Denholm called a “life-changing” $280 million sale of Tesla options — came from her position as a board member.
The Nasdaq exchange, where Tesla trades, requires independent directors not to be employees, family members or people who “would interfere with the exercise of independent judgment.”
Tesla shares are down nearly 30% so far this year. Last month, Tesla leadership told investors on an earnings call that sales growth this year “will likely decline significantly,” and Musk believes that without trade barriers, Chinese automakers “will nearly destroy most of the world’s Other Automotive Companies,” sending stock prices plummeting. “.
Monday’s sell-off was also tied to brokerage Piper Sandler’s decision to lower its price target on Tesla shares. The company said it now expects deliveries to be below 2 million vehicles this year, suggesting Tesla’s growth will be flat.
“The story of crony non-independent boards is not new,” Gordon Johnson, CEO of GLJ Research and a longtime Tesla critic, told CNN. “The biggest issue for Tesla is the potential for its business to Growth and margins are collapsing.”
Johnson added that the reporting, which followed the Delaware ruling, “gives wealth managers a reason to pull out.”
“The idea that Tesla is a technology company that does things better than the rest of the automotive industry has been thoroughly debunked… I think the market is recognizing that more and more every day, Elon Musk’s shenanigans is helping the market realize this more and more.” Come to this conclusion. “