NEW YORK, May 17 (Reuters Breakingviews) – Portraying a CEO as a father figure is one way to tell there’s a lack of judicious oversight. Backing the company’s board despite obvious shortcomings is another. Tesla shareholders did both on Tuesday, with one of them playing the part of boss Elon Musk’s “son,” a robot the electric-car maker is developing, and many others again ignoring qualms about director nominees raised by proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis. The corporate governance neglect is troubling.
After years of erratic behavior, Musk is hoisting new red flags. Avowing to CNBC after the shareholder meeting that he’ll say what he wants even “if the consequence of that is losing money,” should be a significant concern. It’s a vulnerable time for such pronouncements when the market Tesla (TSLA.O) effectively created threatens to overtake it. The stock price has tumbled some 60% since November 2021 compared to a 12% decline in the S&P 500 index (.SPX). Already distracted by running rocket launcher SpaceX and other ventures, the CEO has spent even more time elsewhere, tending to his $44 billion acquisition of Twitter.
That burden, in theory, should be easing with last week’s hiring of a CEO. Musk has made clear, however, that he will still be involved. His Twitter obsession already is a growing liability. He tweeted on Monday that investor George Soros, a frequent bogeyman of the far right who recently sold his stake in Tesla, “wants to erode the very fabric of civilization.” It is part of a conspiracy-theory indulgent pattern that promises to scare off potential Tesla buyers and investors.
If there was any lingering doubt about Musk’s problems with Twitter, a Monday judicial ruling erases it. A court affirmed a Securities and Exchange Commission settlement that requires a lawyer to screen any of the CEO’s material posts about Tesla after one he wrote in 2018 about taking the company private.
A more deferential approach to Musk might have made sense during Tesla’s meteoric rise, when its mere existence bucked convention. At this stage, it amounts to self-harming negligence by shareholders. A California lawsuit joins others in alleging discriminatory employment practices. The Department of Justice has initiated a probe into Tesla’s self-proclaimed “self-driving” capabilities, which have been involved in fatal crashes. Heeding advice from ISS and Glass Lewis would at least be a place to start, because leaving governance on autopilot also can have dangerous consequences.
Follow @JMAGuilford on Twitter
Tesla shareholders voted on May 16 to re-elect Elon Musk and Robyn Denholm to the company’s board and to add JB Straubel as a director. Proxy advisory firm Institutional Shareholder Services had recommended that investors vote against Denholm, owing to “concerns on the risk oversight function of the board,” while Glass Lewis recommended voting against Straubel.
In an interview with CNBC following the electric-car maker’s annual shareholder meeting, Musk fielded questions about a range of subjects, including his recent posts on Twitter – the social media site he acquired in October 2022 for $44 billion – regarding a recent mass shooting and investor George Soros. Musk said he would continue to say “what I want to say, and if the consequence of that is losing money, so be it.”
Editing by Jeffrey Goldfarb and Streisand Neto
Our Standards: The Thomson Reuters Trust Principles.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.