Tesla Model S
Credit:Tesla
“The concerns about Mr. Musk’s actions as Tesla CEO since his purchase of Twitter and the Board’s failure to address or disclose potential risks related to them raise obvious questions about Tesla’s compliance with SEC rules and regulations,” said Senator Elizabeth Warren.
“Mr. Musk’s personal wealth … do(es) not shield him or the Tesla Board from meeting basic SEC governance and disclosure rules,” said Senator Elizabeth Warren.
July 18, 2023 - Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.), a member of the Senate Banking, House, and Urban Affairs Committee, has sent a letter to the Chair of the Securities and Exchange Commission (SEC), Gary Gensler, calling on the SEC to open an investigation into Tesla and the Tesla Board of Directors’ (Board) failure to manage the actions of CEO Elon Musk in his dual role as CEO of Twitter and Tesla.
“Mr. Musk’s actions since purchasing Twitter and becoming its Chief Executive Officer (CEO) – while remaining Tesla’s CEO – have raised concerns about conflicts of interest, misappropriation of corporate assets, and other negative impacts to Tesla shareholders. Despite recent and repeated calls from investors to address these actions, the Board appears to have failed to uphold its legal duty to ensure that Mr. Musk act in the best interest of Tesla. The Board also does not appear to have adequately disclosed concerns about these issues to investors, undermining shareholders’ ability to make informed voting and investing decisions and to hold their fiduciaries accountable,” wrote Senator Warren.
In December 2022, following Elon Musk’s purchase of Twitter, Senator Warren sent a letter to the Chair of Tesla’s Board, expressing concerns about the corporate governance issues raised by Musk’s deal to buy Twitter and his actions after becoming CEO. She raised concerns about the possible misappropriation of Tesla resources, conflicts arising from Twitter’s reliance on advertising revenue from automobile companies, and possible violations of state and federal labor law in Mr. Musk’s appropriation of Tesla employees. Senator Warren asked the Board a series of questions to determine if it was properly addressing the corporate governance concerns raised by Musk’s dual role as Tesla and Twitter’s CEO – which to date it has not answered.
“Unlike Twitter, Tesla is a public company listed on the Nasdaq Stock Exchange. As such, it must have an independent board of directors whose role it is to ‘act on behalf of investors to maximize shareholder value … and guard against conflicts of interest.’ But despite repeated calls to address the risks posed by Mr. Musk’s conflicting dual roles at Tesla and Twitter and his actions since acquiring Twitter, the Tesla Board has taken no apparent action to address concerns related to Mr. Musk and protect its shareholders … The Board’s apparent lack of independence, combined with its inaction and incomplete disclosures, raise questions about possible violations of securities laws and exchange rules which fall under SEC’s jurisdiction,” continued Senator Warren.
Senator Warren lays out possible violations of securities laws, including Nasdaq listing rules requiring a majority independent board; SEC disclosure requirements regarding Board independence and related party transactions; and SEC rule 10b-5 regarding statements about Tesla’s code of ethics.
“Tesla is publicly owned, and Mr. Musk and the Board have responsibilities to shareholders and the public in their management of the company. Mr. Musk’s personal wealth – and his personal relationships with Board members – do not shield him or the Tesla Board from meeting basic SEC governance and disclosure rules. The concerns about Mr. Musk’s actions as Tesla CEO since his purchase of Twitter and the Board’s failure to address or disclose potential risks related to them raise obvious questions about Tesla’s compliance with SEC rules and regulations. I am therefore asking the SEC to open an investigation into Tesla to ensure that the actions of Mr. Musk and the Tesla Board have not violated securities laws,” concluded Senator Warren.
Source: Senator Elizabeth Warren
