An investment group managing union pensions is turning its attention to corporate governance at Tesla Motors (TSLA) , calling on the automaker to add two independent directors and separate the roles of chairman and CEO currently held by Elon Musk.
CtW Investment Group, which holds about 200,000 Tesla shares, also called on independent directors to carefully consider Tesla's proposed $2.8 billion bid for SolarCity (SCTY) . Musk is also the largest shareholder in SolarCity, and some critics have complained that Tesla's bid is a way to prop up the struggling solar panel vendor.
The investment group, in a letter to the company, also called for a declassification of the board so shareholders can vote annually on every director, and a change in bylaws that would forbid immediate family members of directors to serve concurrently. Taking those steps, according to CtW, would allow Tesla to "to remedy its underlying governance deficiencies."
The potential for conflict has been front and center in the days since Tesla announced its intention to bid for SolarCity, given the close ties between the two companies and commingling of directors. But, as CtW noted, each company has issues independent of the other: Tesla's seven-person board includes Musk, his brother Kimbal, and close confidant Antonio J. Gracias. It also includes two venture capitalists who have invested in other Musk projects including SolarCity and SpaceX.
"The core problem with Tesla's governance is the continuing dominance of the board by Mr. Musk," CtW wrote. "We are concerned that Mr. Musk continues to dominate the board and sits at the heart of a complex web of relationships among board members and other companies controlled by him and/or family members."
Tesla offered no immediate response to CtW's letter, though the company said in its annual proxy statement that it believes its board meets the formal Nasdaq requirements for independence.
CtW's criticism of Tesla's governance is nothing new. The company as far back as 2014 was writing to Gracias, as lead independent director, calling on the company to adopt "a robust governance structure" and more quickly evolve away from the insular nature of a venture-backed startup and toward a large, publicly traded entity.
As Tesla has grown, it is attracting significant interest from unions. Several hundred union and non-union construction workers at the company's Nevada battery factory walked off the job in February to highlight what the workers claimed were third-party contractors brought in using lower paid, out-of-state laborers.