Elon Musk takes the stage at Tesla’s annual shareholder meeting Tuesday with the gap between the fervor of its fans and the doubts of its skeptics as wide as it’s ever been.
The annual meeting usually functions as a chance for some of Musk’s most adoring devotees to bounce ideas off the chief executive officer and pick his brain. But before a Q&A, the electric-car maker will have to deal with orders of business relating to corporate governance. An activist group has mounted a campaign against several members of the board, while an individual retail investor is pushing for someone other than Musk to be chairman.
Here are five key things to listen for when the meeting gets underway at 2:30 p.m. California time:
Tesla’s nine-member board of directors serve staggered terms, and three are up for re-election: Antonio Gracias, a private equity investor; Kimbal Musk, a food entrepreneur and Elon’s brother; and James Murdoch, CEO of Twenty-First Century Fox (fox).
CtW Investment Group, which works with union pension funds, has urged shareholders to vote against all three. The group has cited a host of issues—from failure to reach production milestones to Musk’s recent combative earnings call—as examples of how the board is insufficiently governing Elon Musk and his company.
Proxy adviser Glass Lewis & Co. sided with CtW and opposed all three directors, and larger adviser Institutional Shareholder Services came out against Gracias and Murdoch. Tesla has responded with a series of slides that defend its directors, recalling how Gracias and his firm helped get battery production going to support the Model 3 sedan, emphasizing Kimbal Musk’s success as an entrepreneur and downplaying the demands on Murdoch’s time linked to his role at Fox.
Musk’s Multiple Hats
Jing Zhao, a shareholder from Concord, Calif., has proposed a requirement that an independent director serve as chairman of the carmaker. The overture of humble origin—Zhao notified Tesla he owned just 12 shares—won both ISS and Glass Lewis’s backing.
Musk has been chairman since 2004 and CEO since 2008. Tesla is recommending that shareholders vote against Zhao’s proposal, saying the company’s success to date wouldn’t have been possible without a board led by Musk’s “day-to-day exposure” to the business. At last year’s annual meeting, he said he devoted more than 90% of his time running Tesla and rocket company Space Exploration Technologies (SpaceX), devoting the remainder to pursuits such as his tunnel-digging startup Boring Co.
The board also believes that Gracias’s role as lead independent director protects the company against any potential governance issues.
A Director’s Lengthy Leave
Another touchy governance subject that could come up is Tesla’s handling of Steve Jurvetson, a well-known Silicon Valley investor who’s been on a leave of absence from the board since November. Jurvetson resigned from DFJ, the venture capital firm he co-founded, amid accusations of misconduct that he has denied.
But the results of DFJ’s internal investigation into Jurvetson’s alleged behavior have never been made public, and it’s not clear why his board seat at Tesla (tsla) is still in limbo. CtW said Tesla’s board should have insisted on Jurvetson’s resignation. Glass Lewis wrote in its report that Gracias—as lead director and member of the board’s nominating and corporate governance committee—should be held to account for what it called the “fairly extraordinary length” of Jurvetson’s leave.
Model 3 Updates
If the more than 2,100 replies to the @Tesla Twitter feed’s solicitation for questions is any guide, Musk is likely to face queries about future products and the state affairs with its newest car, the Model 3.
The sedan is the linchpin to the company’s efforts to bring more affordable electric vehicles to the masses and achieve profitability. But production goals have been pushed back several times, and Tesla’s latest is to make 5,000 units a week by early July. Hundreds of thousands of people placed $1,000 deposits for the car, but the company has been coy about the rate at which reservation holders are following through with orders when invited to configure their sedan. Converting its almost $1 billion in customer deposits into orders will obviously be key to Tesla sorting out its cash issues.
During the May 2 earnings call, Musk said that Tesla is “going to conduct a sort of reorganization” or “restructuring” of the company. He also expressed frustration about the number of third-party contractors working at Tesla, and said he was going to “scrub the barnacles” on that front.
The following week, Bloomberg News reported that engineering chief Doug Field would take a break from the company. And a few days after that, Musk told employees he was “flattening” Tesla’s management structure. After a spree of high-profile defections, the company has announced the hiring of new executives from the likes of Amazon and Snap. The annual meeting could be an opportunity for Musk to assuage concerns about management turnover, plus provide an update on the reorganization of the company.