As Tesla pushes state lawmakers to allow it to sell vehicles in Connecticut, the overseer of the state’s pension funds, which owns a small sliver of the $51 billion automaker, is pushing the company to reform its procedures for electing directors.
The proposal from the Connecticut Retirement Plans and Trust Funds (CRPTF), led by state Treasurer Denise Nappier, would require members of Tesla’s board of directors to stand for election annually, according to recent filing with the U.S. Securities & Exchange Commission.
Currently, Tesla directors are split into three classes, each serving staggered three-year terms.
The CRPTF wrote in its proposal that the structure “is not in the best interest of shareholders because it reduces accountability and is an unnecessary anti-takeover device.”
CRPTF also argues that Tesla board members, including CEO and board chair Elon Musk, have various conflicts of interest.
“The lead independent director of Tesla’s board, Antonio Gracias, serves on the board of SpaceX, also led by Musk, and served on the board of SolarCity, another Musk-founded firm that was recently acquired by Tesla,” CRPTF wrote. “Gracias is the CEO and majority owner of a limited partnership in which both Musk and his brother are limited partners. In our view, these relationships call into question Gracias’ ability to effectively lead the board in its monitoring responsibilities, including its oversight of Musk.”
Tesla’s management, however, opposes the changes and has recommended its shareholders vote against it at its annual meeting on June 6 in California.
Tesla said the change would not benefit the interests of the company or its shareholders, and counters that the staggered board structure has allowed it to make “a number of key decisions which might have appeared counter-intuitive to some.”
“The company’s mission, which is to accelerate the world’s transition to sustainable energy, requires particularly long-term strategic planning by our board,” Tesla wrote in an SEC filing. “By providing directors with staggered three-year terms, our current Board structure allows our directors to maximize the interests of the company and our stockholders over the long-term, without being distracted by special interests that seek only short-term returns.”
It’s not the first time Nappier and the approximately $31.5 billion CRPTF have practiced shareholder activism.
CRPTF has played a role in recent changes at Wells Fargo and at a Tennessee hospital network operator.
An attempt to force Google to disclose more information about its lobbying efforts failed in 2014.
Nappier was also an early advocate for “say-on-pay” rules that took effect six years ago.
