Unlike investing all your money in Bitcoin, or stuffing it under the mattress, being a shareholder comes with a few perks. Among them is the right to speak up at the annual shareholder’s meeting, and share your views with other shareholders, who ultimately decide the fate of the company.

While all shareholders get a say, the more shares you own, the louder your voice is. With Tesla’s market cap hovering around $50 billion, they have around 168 million shares available, meaning 168 million votes at the table.

That isn’t stopping Jing Zhao, who owns a whole 12 of those shares, from speaking up about his plan to replace Elon Musk as the Chairman of Tesla’s board. Zhao submitted his proposal ahead of the June shareholder’s meeting:

“Although the current leadership structure, in which the positions of Chairman and CEO are held by one person, could provide an effective leadership for Tesla at the early stage” said the man with a modest but respectable investment, “now in this much more highly competitive and rapidly changing technology industry, it is more and more difficult to oversee Tesla’s business and senior management (especially to minimize any potential conflicts) that may result from combining the positions of CEO and Chairman.”

Zhao also mentioned how Elon Musk’s involvement with SpaceX and Solar City could lead to conflicts of interest between the companies, which may hurt Tesla down the line.

While his radical proposal was heard by the board and its shareholders, we don’t expect Elon to be ousted any time soon. In a statement released shortly after this proposal, the board expressed its opposition to it. “In light of the significant future opportunities for growth and the careful execution needed in order for the Company to achieve it, the Board believes that the Company is still best served by Mr. Musk continuing to serve as Chairman,” the board stated. “Moreover, the role of the Lead Independent Director protects the Company against any potential governance issues arising from a non-independent director serving as Chairman. This position is vested with broad authority to lead the actions of the independent directors and communicate regularly with the Chief Executive Officer. Additionally, the Company now has seven independent directors following the addition of two additional independent directors in July 2017.”

While Jing Zhao’s proposal fell on deaf ears, you have to respect him for standing up, with his 12 shares in hand, and letting his voice be heard. With Tesla shares trading at $293 as of today, he has about $3500 invested in the company, or about 0.0000000714% of the total company value.

You can read the board’s full response below, courtesy of TechCrunch.

The Board believes that the Company’s success to date would not have been possible if the Board was led by another director lacking Elon Musk’s day-to-day exposure to the Company’s business. In light of the significant future opportunities for growth and the careful execution needed in order for the Company to achieve it, the Board believes that the Company is still best served by Mr. Musk continuing to serve as Chairman.

Moreover, the role of the Lead Independent Director protects the Company against any potential governance issues arising from a non-independent director serving as Chairman. This position is vested with broad authority to lead the actions of the independent directors and communicate regularly with the Chief Executive Officer. Additionally, the Company now has seven independent directors following the addition of two additional independent directors in July 2017. The Board believes that the broad authority of the Lead Independent Director and the presence of six other independent directors ensures that the Board acts independently. This current Board structure also is consistent with majority practice at large public companies: according to the 2017 Spencer Stuart Board Index, 72% of companies in the S&P 500 do not have an independent board chairman.

The proponent acknowledges that a combined Chief Executive Officer and Chairman is an effective form of leadership for an early-stage company, until it faces increased competition and rapid technological changes. The Board believes that it is precisely during times when a company must quickly adapt to constant change and outside pressures that Board leadership needs to be lockstep with the Company’s operations. Our achievements to date notwithstanding, the Company is still at a point in its development where we must execute well in order to realize our long-term goals, and separating the roles of Chief Executive Officer and Chairman at this time would not serve the best interests of the Company or its stockholders.

Comments