SOC Investment Group asked the Securities and Exchange Commission Friday to investigate Tesla, Inc. (NASDAQ:TSLA) as the company seeks to shrink the size of its board, according to CNBC.
What Happened: In a June preliminary proxy filing, Tesla announced that Oracle Corporation (NYSE:ORCL) founder Larry Ellison would not seek re-election for his board of directors seat at the annual shareholder’s meeting.
While this announcement is nothing out of the ordinary, what Tesla decided to do next is.
Instead of replacing the seat that will be left open as Ellison resigns, the company has decided to reduce the size of its board by one seat. This reduction will eliminate the slot for an independent director to serve on the company’s board.
Tesla's board is currently made up of eight directors, and with Ellison’s resignation the board would shrink to seven directors.
Why Is SOC Investment Calling For An Investigation? SOC said Tesla CEO Elon Musk’s constant use of social media platforms such as Twitter, Inc. (NYSE: TWTR) without approval from a securities lawyer is in violation of a 2018 three-way agreement between the SEC, Musk and Tesla.
SOC’s research director Rich Clayton expressed concern to CNBC that if Tesla’s board size is decreased, there will be no independent review on the board and the company will continue to run based on Musk's personal interests.
Clayton said: “The board has repeatedly made decisions not in the long-term best interests of Tesla, but driven by Elon Musk’s personal interests.”
SOC's letter to the securities regulator mentions that shareholders have suffered due to Musk’s actions.
The SEC has also opened an investigation into Musk for insider trading about private information he disclosed reguarding his possible buyout of Twitter. Musk responded to that investigation by saying that the SEC is attempting to squash his right to free speech.
