Tesla succession planning a hot issue at shareholder meeting

Tesla CEO Elon Musk was expected to be under pressure to address investor concern about the lack of a clear successor, softening demand and delays of some new models at the carmaker’s annual shareholder meeting on Tuesday.

The billionaire entrepreneur, also the top boss of Twitter, last week announced that NBCUniversal’s former advertising head Linda Yaccarino will succeed him as Twitter CEO and that he will focus on products and technology at the social media firm.

Musk said the move would allow him to devote more time to the electric carmaker, but his commitments to other ventures such as a new artificial intelligence (AI) start-up remain a worry.

“He could spend more time with X.AI Corp. He has passion about AI,” said Gene Munster, managing partner at Deepwater Asset Management.

“I think that’s a big X Factor” and it remains unclear who Musk is hiring for the AI start-up, said Munster.

Succession

Investors were set to vote on a shareholder proposal for the company to publish a report on “Key-Person Risk”, reflecting concerns that the carmaker relies too heavily on Musk’s leadership. The proposal seeks to identify key people and establish succession processes.

Musk said at a shareholder meeting last year that he will stay at the carmaker as long as he is useful, amid concern that buying Twitter would distract him from his job at Tesla.

James Murdoch, a Tesla director, testified in court in November that Musk had in the previous few months identified someone as a potential successor to head the electric carmaker.

Tesla board members have discussed CFO Zach Kirkhorn as a possible successor to Musk as CEO, the Wall Street Journal reported last week, citing a person familiar with the matter.

Board nominees

Investors will also vote on the appointment of Tesla co-founder and former chief technology officer JB Straubel as one of the board members.

Straubel is considered a potential successor to Musk too, according to Deepwater’s Munster.

Proxy advisory firm Glass Lewis recommended Tesla shareholders vote against Straubel’s appointment, citing worries about his independence. Straubel is also CEO of Redwood Materials, a battery recycling and materials company.

Shareholders were set to vote on the re-election of Musk and chair Robyn Denholm as board members.

Proxy advisory firm ISS recommended Tesla investors vote against the re-election of Denholm, citing concerns about a lack of scrutiny over the use of Tesla shares as collateral for loans by Musk and his brother Kimbal.

Investors hope Musk will talk about demand against the backdrop of a slowing economy and growing competition.

Musk said in April the electric vehicle maker would prioritise sales growth ahead of profit, after it missed its margin target due to aggressive price cuts.

Tesla may need to freshen its aging product line-up to meet its ambitious sales targets and fend off rising competition.

Musk said in April that he expected a delivery event for the long-delayed Cybertruck pickup trucks. He had flagged strong demand for the Cybertruck, but it takes time to get the manufacturing line going for the “very radical product”.

Investors are also awaiting details about Tesla’s cheaper electric cars.

Reuters