Tesla moved its corporate domicile to Texas from Delaware last year after a court ruling angered Musk.Tesla is days away from missing a deadline to hold an annual shareholders meeting, exposing itself to lawsuits and amplifying criticism that the carmaker’s board of directors has been inactive while sales and the stock price slump.
In Texas, where Tesla is incorporated, the law requires companies to hold annual meetings no later than 13 months since the previous meeting. In Tesla’s case, that would be Sunday, July 13.
Tesla has not announced a date for a meeting or filed any proxy statements — the documents that describe the annual meeting’s agenda, the candidates for the board and proposals to be voted on.
The meeting would normally provide shareholders an opportunity to speak directly to Tesla’s board and to CEO Elon Musk at a critical time for the company. Tesla sales have been plunging, and the stock price has fallen almost 40% from a peak in December.
“This lack of transparency raises serious concerns about the company’s respect for shareholder rights,” a group of state treasurers and other representatives of large shareholders said in a letter to Tesla on Wednesday.
The shareholder representatives, including Brad Lander, the New York City comptroller, and treasurers or comptrollers of Oregon, Illinois and Maryland, oversee pension and investment funds that own hundreds of millions of dollars in Tesla shares. They were among 27 shareholder representatives who signed the letter, including pension funds from Denmark and Sweden and religious groups such as the Friends Fiduciary Corp., a Quaker organization.
Tesla shares slid further this week as Musk floated plans to form a new political party after falling out with President Donald Trump last month. Investors are concerned that Musk’s political activities have distracted him from the car business and will further alienate customers who object to his support for right-wing causes.
“It’s hard for me to imagine any other board of a major corporation allowing the kind of plummeting stock price and deleterious behavior of a CEO as this board has allowed to happen,” Brooke Lierman, the Maryland comptroller, said in an interview. The Maryland State Retirement and Pension System has about $175 million invested in Tesla.
Annual meetings are routine for publicly listed companies, and it is rare for a corporation, much less one with as much weight in the stock exchange as Tesla, not to call one. Tesla’s stock market value of more than $900 billion makes it the most valuable car company in the world and one of the most valuable companies of any kind.
“An annual meeting provides shareholders with the opportunity to hear directly from the board about these concerns, and to vote for or against directors, the board’s approach to executive compensation and other matters of material importance,” the investor representatives said in their letter, which they publicly released.
Companies sometimes delay annual meetings because of a pending merger or acquisition, or because they are in financial trouble. There is no indication any of those circumstances apply to Tesla. In the rare cases that companies delay annual meetings, they usually provide an explanation.
Tesla has not explained the delay and did not reply to a request for comment.
“Delaying a meeting for no reason is strange in my view,” said Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware.
Annual meetings are “a platform for shareholders, the owners of the company, to identify their concerns,” Elson said. “If there is no meeting, there is no day of reckoning.”
Texas law does not specify penalties for companies that do not hold annual meetings, and it is unclear what the consequences would be. Shareholders could ask a judge to order Tesla to hold a meeting, but a judge would have little precedent to rely on because it is so rare for companies to skip annual meetings.
Tesla moved its corporate domicile to Texas from Delaware last year after a court ruling angered Musk. A Delaware judge had ruled in favor of shareholders who challenged the pay package that helped make Musk the world’s richest man. Tesla has appealed the ruling to the Delaware Supreme Court.
Delaware has long been a popular place for companies to incorporate because of its court system, where judges who specialize in corporate law have a reputation for deciding cases efficiently at lower cost. But recent rulings favoring shareholders have prompted some companies to move their state of incorporation to Texas or Nevada in the belief that judges there will be more sympathetic to management.
Nasdaq, the exchange where Tesla shares are traded, requires companies to hold annual meetings within a year after the end of the last fiscal year, or Dec. 31 in Tesla’s case. In extreme cases a company that fails to hold a meeting could lose its listing.
Tesla’s board has long faced accusations of poor corporate governance. Chancellor Kathaleen St. J. McCormick of the Delaware Court of Chancery, the judge who voided Musk’s pay package last year, concluded that board members “acted under a controlled mindset,” and were friends of Musk or owed their wealth to him.
