Tesla Board Opposition Builds as Proxy Firm Slams Bad Governance

(Bloomberg) -- Tesla Inc.'s board is coming under more criticism, with the world's second-biggest proxy adviser siding with investors that oppose the re-election of three directors and want the company to appoint an independent chairman.

Shareholders should vote against Antonio Gracias, Tesla's lead independent director; Kimbal Musk, the brother of Chief Executive Officer Elon Musk; and James Murdoch, CEO of Twenty-First Century Fox Inc., Glass Lewis & Co. said in a report. The firm also believes the electric-car maker's investors would be better served by separating the chairman and CEO roles that Musk has held for at least the last decade.

The recommendations clash with Tesla's board, which has urged votes against the independent chairman proposal. CtW Investment Group first provoked resistance to the three directors up for re-election by laying out a case against them in a letter to shareholders last week. The activist firm said it's working with union pension funds that are Tesla investors and manage more than $250 billion.

A Tesla spokesman declined to comment. The shares slipped 0.2 percent before the start of regular trading and are down almost 9 percent this year.

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Much of Glass Lewis's argument against the directors focused on Gracias, a private-equity investor and director since 2007 who has both personal and professional ties to Musk, 46. The proxy firm joined CtW in criticizing the board's handling of director Steve Jurvetson, who's been on a leave of absence for about six months. Jurvetson left DFJ in November after the venture capital firm announced it was investigating him for unspecified misconduct.

“We are concerned by the fairly extraordinary length of Mr. Jurvetson's leave of absence,” Glass Lewis said in its report. “Given Mr. Gracias' position as lead director as well as the only member of the nominating and corporate governance committee up for election at this year's annual meeting, we believe it is reasonable for shareholders to hold Mr. Gracias to account for the lapse in good governance embodied by Mr. Jurvetson's extended absence.”

A year ago, Glass Lewis was for all three directors who were up for election: Musk, Jurvetson and Robyn Denholm, the chief operating officer of Telstra Corp., Australia's largest telecommunications company.

This year, the proxy adviser cited concerns about objectivity and proper oversight for its opposition to both Gracias and Kimbal Musk. Glass Lewis considers both to be affiliated with Tesla and cited an insufficient number of independent directors in recommending votes against them.

James Murdoch, son of News Corp. Executive Chairman Rupert Murdoch, may not be able to devote enough time to his role as Tesla director because he's CEO of Twenty-First Century Fox and on the boards of a total of four public companies, Glass Lewis said.

To contact the reporter on this story: Dana Hull in San Francisco at dhull12@bloomberg.net

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Alistair Barr

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