Whether investors want to admit it or not, one of the most fascinating parts of the Tesla Inc (NASDAQ:TSLA) story is CEO Elon Musk. He’s brilliant and brash, intelligent yet immature, and frank while frightening. He’s not unlike shock-jock DJ Howard Stern. And both TSLA stock owners — and non-owners — love to follow the saga just because they have no idea what Musk might say or do next.
There are times, however, where the best thing to say is absolutely nothing at all.
Last week was one of those times.
It will blow over; it always does. But Musk probably should have thought it out before tweeting “This investor group should buy Ford stock. Their governance is amazing” to a group of Tesla stock holders concerned that the company’s board of directors isn’t quite independent enough.
While Tesla’s (and Musk’s) usual fans quickly came to his support, the comparison to Ford Motor Company (NYSE:F) not only showed a lack of discretion — it opened the door to closer scrutiny of governance at Tesla.
A Brilliant Comparison to Make
Musk’s tweet was in response to a letter he received on Monday from an ad hoc group of Tesla stock owners — presumably institutional investors — pointing out the conflicts of interest built into the board. The group’s specific concern:
“We expect that as companies make the transition to publicly-traded status, the governance structures and practices in place at the time of the IPO will evolve to align with the company’s changing strategy. However, Tesla’s seven-member board is largely unchanged from its pre-IPO days.”
His reference to Ford’s governance may not have been coincidental, taking a shot at the uncanny amount of influence the Ford family has over the company.
Each “family” share of Ford is granted 16 votes on all matters that require shareholder involvement (like selecting directors), as opposed to just one vote per share of ordinary Ford stock. This effectively means the family controls about 40% of the company’s voting power, even without owning anywhere near 40% of outstanding shares.
Non-family shareholders have attempted to change Ford’s lopsided control structure, but not surprisingly, have failed to get enough votes to do so.
From that angle, Musk may have a valid point about being left alone; it could be worse. Nevertheless, such a comment only draws even more attention to the matter, giving the Tesla stock owner base a reason to look more closely at the company’s ownership allocation … and the board.
More investors may not like what they find.