Sen. Elizabeth Warren is once more calling on the Securities and Change Fee to research whether or not Elon Musk’s dealings with Tesla board members have crossed the road from a CEO who solutions to impartial board members with the ability to rent and hearth the chief, to a CEO with a board in his thrall.
In a letter to SEC Chair Gary Gensler in the present day, Warren raised a litany of considerations about Musk, arguing that all the points ought to be probed by the SEC. Warren mentioned Musk treats publicly traded Tesla like an organization he owns outright when, in actual fact, shareholders personal Tesla. Musk, additionally a shareholder, owns 20.5% of the electrical car producer. She mentioned that when Musk posted on X in January that he could be uncomfortable growing Tesla as a pacesetter in AI and robotics with out having a 25% stake within the firm, he was successfully opting Tesla out of considerable progress alternatives for the corporate, improperly placing the pursuits of Tesla under these of xAI, a startup he based in March 2023.
In response to that “risk” to Tesla, wrote Warren, the board—which incorporates Musk’s brother, Kimbal Musk, and Tesla’s former chief know-how officer, JB Straubel—remained silent. Administrators issued no feedback to make clear the character of Musk’s management of Tesla, the board’s impartial oversight, his possession stake within the firm, or its alternatives within the area of AI, she mentioned.
Warren’s new urging comes at a murky time for Musk. Tesla inventory is down 30% this 12 months and Musk has confronted calls from traders to form up his act as a CEO. Nonetheless, Musk has an enormous fan base. At a current Singularity College occasion the place Musk appeared on a video name with founder and director Peter Diamondis, Musk described his purpose of reaching the moon after one other 5 or 6 house flights this 12 months. The viewers cheered after he knocked on his brow to keep away from jinxing himself.
However regardless of his followers, Warren and regulators have criticized Musk’s willingness to bend the norms for public firm CEOs. The SEC has beforehand investigated Musk or his public statements at the very least 3 times. Warren additionally raised the monetary hyperlinks between Musk and a few of his board members, which embrace investments in a few of his personal firms. Warren beforehand wrote to Tesla board chair Robyn Denholm to inquire concerning the misappropriation of Tesla executives and assets to X after Musk’s $44 billion takeover of what was then known as Twitter in Oct. 2022. Warren mentioned Denholm by no means wrote her again.
Warren additionally complained that Tesla instantly reversed course and started paying for advertisements on X after Musk purchased the corporate. “Mr. Musk has additionally created a pathway that will enable Tesla to channel cash to X although paid promoting,” wrote Warren. “Musk acknowledged it was ‘ironic’ to vary his stance solely few months after shopping for Twitter, which is ‘extremely depending on advertisements.’”
Musk’s relationships with some board members return a decade or longer and Warren famous that the current Delaware Chancery Courtroom ruling that vacated Musk’s $56 billion compensation plan and known as into query the Tesla board’s independence additional underscored these worries.
“Regardless of the rising considerations posed by Mr. Musk’s conflicting roles at Tesla and his personal firms, the Board seems to have taken no motion to handle these dangers or defend its shareholders,” mentioned Warren. “By all appearances, evidently the Board continues to function as if Mr. Musk is the ‘Technoking’ who can do no flawed.”
An SEC spokesperson mentioned in an announcement to Fortune that Gensler would reply to members of Congress straight.
Tesla didn’t reply to a request for remark.Subscribe to CHRO Every day, our e-newsletter specializing in serving to HR government navigate the altering wants of the office. Join free.