A Tesla (TSLA) It is a few days after losing the deadline to hold its annual shareholder meeting, exposing themselves to lawsuits and expanding criticism that the automaker’s board of directors has been inactive while sales and the price of stocks fall.
In Texas, where Tesla is incorporated, the law requires companies to hold annual meetings up to 13 months after the previous meeting. In the case of Tesla, this would be on Sunday, July 13.
But Company A did not announce a date for the meeting or submitted any power of attorney – the documents describing the agenda of the annual meeting, the candidates for the board and the proposals to be voted.
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The meeting would normally provide shareholders the opportunity to speak directly to the Tesla Council and the CEO Elon Musk in a critical moment for the company. Tesla sales have plummeted, and stock price fell almost 40% since peak in December.
“This lack of transparency raises serious concerns about the company’s respect to shareholders’ rights,” said a group of state treasurers and other major shareholders representatives in a letter to Tesla on Wednesday (9).
Shareholders’ representatives, including Brad Lander, “Comptroller” (a kind of auditor) from New York City, and Oregon, Illinois and Maryland treasurers or “Comprollers”, supervise pension funds and investments that have hundreds of dollars in Tesla shares. They were among 27 shareholders representatives who signed the letter, including Denmark and Sweden pension funds and religious groups such as Friends Fiduciary Corp., a Quaker organization.
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Political distractions of Musk?
Tesla’s actions fell even more this week, while after disagreements with President Donald Trump last month. Investors are concerned that Musk’s political activities are distracted from the electric car business and further remove customers who oppose their support for right -wing causes.
“It’s hard for me to imagine any other advice from a large corporation allowing the price of stocks and the harmful behavior of a CEO like this advice allowed it to happen,” Maryland’s “Comproller” said in an interview. Maryland’s retirement and pension system has about $ 175 million invested in Tesla.
Annual meetings are routine for publicly traded companies, and it is rare a corporation, even more so with so much purse as Tesla, not calling one. Tesla’s market value, of over $ 900 billion, makes the world’s most valuable automaker and one of the most valuable companies in any segment.
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“An annual meeting offers shareholders the opportunity to listen directly from the Council about these concerns, and to vote for or against directors, the board approach to executive remuneration and other materials of material importance,” said investors representatives in his letter, which was publicly disclosed.
Companies sometimes delay annual meetings due to a pending merger or acquisition, or because they are in financial difficulty. There is no indication that any of these circumstances apply to Tesla. In the rare cases where companies delay annual meetings, they usually provide an explanation.
Tesla did not explain the delay and did not respond to a request for comment.
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What are the consequences?
“Delaying a meeting for no reason is strange in my view,” said Charles Elson, founding director of Weinberg Center for Corporate Governance at Delaware University.
Annual meetings are “a platform for shareholders, the company’s owners, identify their concerns,” said Elson. “If there is no meeting, there is no day of reckoning.”
Texas law does not specify penalties for companies that do not hold annual meetings, and it is unclear what the consequences would be. Shareholders could ask a judge to order Tesla to hold a meeting, but the magistrate would have few precedents to be based, as it is very rare companies to skip annual meetings.
Tesla moved its corporate domicile to Texas from Delaware last year after a court decision that annoyed Musk. A delaware judge had decided in favor of shareholders who contested the remuneration pack that helped make Musk the richest man in the world. Tesla appealed from the decision to the Supreme Court of Delaware.
Delaware has been a popular place to incorporate companies due to their judicial system, where judges specialized in corporate law have a reputation to decide cases efficiently and at a low cost. But recent decisions favorable to shareholders have led some companies to change their state of incorporation to Texas or Nevada, believing that the judges of these states would be more friendly to management.
Nasdaq, a scholarship where Tesla’s shares are negotiated, requires companies to hold annual meetings within a year after the end of the last fiscal year, ie December 31 in the case of Tesla. In extreme cases, a company that does not hold a meeting may lose its listing.
Tesla’s advice has long faced charges of corporate governance. Chancellor Kathaleen St. J. McCormick of the Delaware Chancellery Court, the judge who annulled the musk remuneration package last year, concluded that the board members “acted under a controlled mindset” and were friends with Musk or owed their wealth to him.
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