Tesla Gets Some Independent Supervision

After facing criticism for having a board of directors best described as ‘Elon’s friends and family,’ Tesla announced two new directors on Tuesday, neither of whom have familial or business ties to Tesla’s founder and CEO Elon Musk or the company.

The new directors are James Murdoch, CEO of 21st Century Fox and Linda Johnson, CEO of Ebony Media Operations, the parent company for Ebony and Jet. As so-called independent directors, Murdoch and Johnson will stand out on Tesla’s expanded board, which still has five Musk associates -- friends, family members, or business partners -- plus Musk himself.

That’s been a sore point for some investors, since a public company’s board is responsible for oversight of the company and intended to represent all shareholders. Ahead of Tesla’s shareholder meeting in early June, the Connecticut Retirement Plans and Trust Funds, a large shareholder, criticized the structure and composition of Tesla’s board. The pension fund argued that Tesla’s directors -- including Musk’s brother Kimbal and several partners in Musk’s other businesses SpaceX and SolarCity -- were not sufficiently independent of Musk and did not have interests sufficiently aligned with those of shareholders.

The pension fund’s proposal also sought to increase the board’s accountability by electing board members to one-year terms versus the current arrangement of three-year staggered terms. The measure failed to receive enough votes at the shareholder meeting, but Musk promised he would work on creating a more independent board. Time will tell if the Connecticut pension fund and other investors are satisfied with the change, though ultimately investors haven’t seemed particularly concerned. Tesla shares have soared 51.5% this year.

Rice is a seasoned corporate board member, and she’s currently a director of ad firm Omnicom Group and food delivery site Grubhub. She’s previously served on several other companies’ boards including Bausch & Lomb, Quaker Oats, MoneyGram, and Kimberly-Clark Corporation. James Murdoch, the son of News Corp executive chairman Rupert Murdoch, has held various positions across the media empire both in the U.S. and abroad. (Disclosure: News Corp owns Dow Jones, the parent company of Barron’s).

Big Picture: Tesla’s board gets two new independent directors, but the company’s board remains rather cozy with founder Elon Musk.

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