Proxy advisory firm Institutional Shareholder Services (ISS) cited concerns about the “board’s risk oversight in light of the pledging (as collateral) of a significant amount of the company’s stock by certain directors”. Stating that as a reason, the ISS suggested investors vote against Ira Ehrenpreis and Kathleen Wilson-Thompson.
Ehrenpreis and Wilson-Thompson were both part of the Corporate Governance Committee and nominating committee at Tesla. Big institutional investors usually take their cues on voting on company matters from proxy advisers’ recommendations. Pledging of company stock by directors or executive officers can pose a risk to the investments of outside shareholders, ISS said. Added that directors and executives with a pledged position may be forced to sell company stock, for example, to meet a margin call.
As of March 31, Chief Executive Elon Musk, director Kimbal Musk and director Ira Ehrenpreis had pledged a portion of their share ownership, ISS said.
The proxy adviser said that the aggregate number of pledged shares had increased by that date from 88.93 million, valued at $62.756 billion based on the previous fiscal year-end share price, to 89.74 million, valued at $94.835 billion. “This reflects an increase in the number of shares pledged by Elon Musk from 88.33 million to 89.18 million, a slight decrease in Kimbal Musk’s pledging from 599,740 shares to 511,240 shares, and a new pledge of 41,635 shares by Ira Ehrenpreis,” ISS said.
Annual meeting
On May 2, Tesla filed a form 10-K/A with the United States Securities and Exchange Commission (SEC). In the filing, Tesla noted it would delay filing its 2022 proxy statement for the 2022 Annual Stockholder Meeting. The delay led some to speculate that Tesla would also postpone the stockholder meeting and stock split vote.
On March 28, 2022, Tesla announced plans to request stockholder approval to increase the number of authorized shares of common stock at the next annual meeting through an amendment. The increase of authorized common stock would enable a stock split.
“Tesla’s Board of Directors has approved the management proposal, but the stock dividend will be contingent on final Board approval,” noted the company’s 8-K SEC filing on the matter. “[Tesla’s] definitive proxy statement relating to the Annual Meeting will include additional details regarding the Amendment, as well as the record date, date, and location of the Annual Meeting.”
The last stock split initiated by Tesla occurred in August 2020. It was a 5:1 split. Tesla noted that the stock split would make “stock ownership more accessible to employees and investors.” It remains unclear as to what might happen on August 4, with regard to voting against two shareholders.
