Page:Letter by Elizabeth Warren to the Securities and Exchange Commission requesting an investigation of Tesla, Inc.pdf/5

 investors.” Nasdaq rules require that a “majority of the board of directors must be comprised of Independent Directors,” meaning they must not be people who have a relationship which, “in the opinion of the Company's board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.” This important requirement exists so that shareholders can “have confidence that individuals serving as Independent Directors do not have a relationship with the listed Company that would impair their independence.” According to Nasdaq guidance, this obligation also gives the Tesla Board the “responsibility to make an affirmative determination that no such relationships exist.”

The composition of Tesla’s eight-person Board raises concerns about whether it is in violation of the majority independent director requirement. As the founder and CEO of Tesla, Mr. Musk exercises significant control over the day-to-day management of the company, describing himself as a “nano-manager” who “can’t find people to delegate to,” most recently instituting a policy requiring that all Tesla hires be personally approved by him. As discussed above, Mr. Musk has regularly used Tesla resources for his other ventures, including SpaceX and Twitter, and may even be a controlling shareholder of Tesla. Tesla’s own 10-K filings admit the company is “highly dependent” on Mr. Musk and that he “spends significant time with Tesla and is highly active in [its] management.” Mr. Musk has stated he “handpick[ed]” Tesla’s Chair Robyn Denholm and bragged that he “can just call for a shareholder vote and get anything done that [he] want[s].” Given Mr. Musk’s control over Tesla, any close relationship between a Board member and Mr. Musk might constitute a “relationship with the listed Company that would impair [the member’s] independence.”

Members of the Board with known ties to Mr. Musk or Tesla include Mr. Musk himself; Mr. Musk’s brother, Kimball Musk; Ira Ehrenpreis, a “longtime friend” of Mr. Musk who helped design his record-breaking compensation package and explored limiting the disclosure of its details to investors; James Murdoch, Mr. Musk’s friend of almost 20 years who vacations with