In a recent development, activist investors targeting Tesla's (NASDAQ:TSLA) board for allegedly failing to curb CEO Elon Musk's influence believe a recent court ruling on Musk's $56 billion stock compensation may be the catalyst they need for meaningful reforms.
The pivotal moment arrived with a Delaware judge voiding Musk's record-breaking compensation, signaling strong criticism of the board's close ties to the CEO. Critics now hope to leverage this ruling to gain increased support from major index funds and investors during upcoming shareholder votes.
Independent activist investor John Chevedden aims to capitalize on this momentum by presenting a resolution at Tesla's spring shareholder meeting. This proposal seeks to replace the current requirement for major corporate changes to gain support from two-thirds of all outstanding shares with a simpler majority vote.
"People are going to be looking to rein in what's going on," said Chevedden.
Notably, directors up for re-election this year include Musk's brother Kimbal and former 21st Century Fox CEO James Murdoch, who the Delaware judge deemed lacking independence due to personal ties with the CEO.
Analysts anticipate support from influential proxy advisory firms, ISS and Glass Lewis, following the court ruling. However, Tesla's past uncontested director re-elections, receiving 90% or more shareholder support, present a challenge.
To succeed, critics are expected to seek backing from major mutual fund holders such as BlackRock (BLK) and/or Vanguard.
Shares of TSLA are down 2.85% in mid-day trading on Friday.