Page:Letter by Elizabeth Warren to the Securities and Exchange Commission requesting an investigation of Tesla, Inc.pdf/6

 him; and J.B. Straubel, a former Tesla executive whose election to the Board in May of this year was opposed by both proxy advisory firm Glass Lewis and an investor group over concerns about Straubel’s role as a “company insider.”

The investor group noted that Mr. Straubel’s election means “at least five of [the Board’s] eight members lack independence.” Mr. Murdoch and Mr. Ehrenpreis also serve on Tesla’s audit and compensation committees, respectively, both of which are generally required by Nasdaq rules to be composed of independent directors. Despite repeated calls from its shareholders for independence, the Board has continued to appoint and retain members who have relationships to the company, either directly or through Mr. Musk, that may impede their independent decision-making.

These close relationships may explain the Board’s persistent inability or unwillingness to address the concerns posed by Mr. Musk’s actions. In a letter to Tesla in 2020, the SEC told the Board it had “abdicated the duties required of it” by failing to enforce a court-ordered policy requiring Mr. Musk’s tweets be preapproved by company lawyers “despite repeated violations by Mr. Musk.” In December of 2022, Mr. Musk sold nearly $3.6 billion of Tesla shares less than a month before the company announced fourth-quarter vehicle deliveries were significantly below the forecasts it had provided to investors. Tesla shares plummeted by over $50 the following day, dropping the value of the shares Mr. Musk sold by $1.2 billion. In an earnings call in April of this year, Mr. Musk explained that Tesla receives a “daily real-time update of how many cars were ordered yesterday, how many cars were produced yesterday;” that this data “does not have latency;” and touted that he is “not sure there’s any company on Earth that has better real-time data than Tesla, except maybe SpaceX Starlink.” If Tesla’s exceptional real-time data allowed Mr. Musk to see the shortcomings in vehicle deliveries and sell his shares before the company publicly disclosed that information to investors, that would constitute insider trading under Rule 10b5-1. Yet there is no indication that the Board attempted to stop this problematic sale.