In a recent move, Senator Elizabeth Warren of Massachusetts once again called for an investigation into Tesla, CEO Elon Musk, and the company’s board of directors for what she describes as potential misuse of Tesla resources and conflicts of interest stemming from Musk’s dual role at Tesla and X (formerly known as Twitter).
Warren, who serves on both the Senate’s banking and armed services committees, had previously reached out to the U.S. Securities and Exchange Commission (SEC) last July with similar concerns. She also expressed her worries in a letter to Tesla’s board chair, Robyn Denholm.
In a detailed six-page letter dated March 21, Warren brought to light new concerns to the federal agency. She pointed out that recent evidence indicates that Tesla’s board lacks independence from Musk, who Warren suggests uses his influence over the board for personal gain rather than the benefit of Tesla’s shareholders.
Warren’s letter referenced a court ruling from January of this year by Judge Kathaleen McCormick of the Delaware Chancery, which found that Musk had control over Tesla and that the board had breached their fiduciary duties by approving an equity compensation plan for Musk valued at $55.8 billion. Additionally, Warren highlighted that Tesla’s stock price has dropped around 30% so far this year.
The senator also called attention to Musk’s recent public statements and actions that suggest conflicts of interest, such as his demands for voting power over Tesla, his proposal to relocate Tesla’s incorporation site to Texas, and his threat to develop artificial intelligence products elsewhere if his terms are not met.
Although Warren’s office reached out for comments, Tesla’s investor relations VP Martin Viecha and VP of Public Policy and Business Development, Rohan Patel, did not respond. It is worth noting that Tesla does not have a traditional public relations team in North America.
In response to Warren’s letter, Musk took to social media to accuse Warren of being influenced by Sam Bankman-Fried, who was convicted on criminal charges in 2023. Musk insinuated that Bankman-Fried’s father, Joseph Bankman, a Stanford legal scholar, played a role in advising Warren on economic and tax matters. However, a spokesperson for Warren’s office denied Bankman’s involvement.
The SEC, led by Chair Gary Gensler, stated that they would respond to Warren’s concerns directly rather than through public statements. The agency has had a history of clashes with Musk, including a previous charge of civil securities fraud in 2018 over a tweet by Musk about taking Tesla private.
The ongoing tensions between Musk and the SEC have only escalated with the regulator’s current investigation into potential securities fraud in 2022 related to Musk’s acquisition of Twitter stock before a leveraged buyout of the company.
A new probe into Tesla and Musk’s activities could further strain the relationship between the agency and one of the world’s wealthiest individuals. As of the latest trading session, Tesla shares closed down, but saw a slight increase after hours.
In conclusion, the allegations made by Senator Warren raise important questions about corporate governance and potential conflicts of interest at Tesla. The SEC’s response to these concerns will be crucial in determining the next steps in investigating the company’s operations under Musk’s leadership.
In my opinion, transparency and accountability are essential aspects of corporate governance. It is important for companies like Tesla to operate in the best interest of their shareholders and to adhere to regulatory standards to maintain trust and credibility in the market. The ongoing scrutiny of Musk’s actions and the company’s practices highlights the need for robust oversight and governance mechanisms to ensure ethical conduct in the business world.