Elon Musk, the CEO of Tesla, is reportedly facing increasing scrutiny from a coalition of significant institutional investors who are calling for more of his time and attention to be dedicated to the electric vehicle manufacturer as it grapples with a myriad of challenges. The investors have articulated their concerns in a letter directed to Robyn Denholm, Tesla’s board chair, citing a “crisis” within the company characterized by stock price volatility, declining sales, and troubling reports related to human rights practices, all contributing to a deteriorating global reputation.
The group of pension fund leaders, collectively managing investments holding approximately 7.9 million shares in Tesla, emphasizes that many of the issues currently affecting the company can be traced back to Musk’s increasing involvement in various ventures outside of his primary role at Tesla. Their appeal includes a request that the board stipulates a minimum commitment of 40 hours per week from Musk as part of any future compensation package. In addition, the investors are advocating for a clear succession plan for the management of the electric vehicle business to ensure organizational stability, and they suggest imposing limits on outside board commitments for Tesla directors, a move they believe would better align board member priorities with the company’s interests.
The investors’ apprehension is underscored by Tesla’s significant market challenges. Earlier this year, the Delaware Court of Chancery mandated the company to annul Musk’s expansive CEO pay package—originally valued at around $56 billion—citing that Musk exerted too much control over the company and that the board’s compensation committee misled shareholders during the approval process. Following this ruling, Musk has signaled a desire for an even broader shareholding stake, seeking 25% voting control of the company, indicating mounting tensions between him and Tesla’s investors.
Tesla’s brand and reputation have suffered setbacks since 2024, heavily influenced by Musk’s controversial public statements and active political engagements. His substantial financial backing—nearly $300 million—aimed at supporting former President Donald Trump’s re-election bid, coupled with his endorsement of Germany’s far-right AfD party ahead of parliamentary elections, have sparked discontent among consumers and stakeholders alike. These developments have had tangible effects; according to a recent Axios Harris Poll, Tesla has fallen from the eighth to the 95th position among the most popular American brands. The decline highlights a troubling trend, as the company’s public perception increasingly lags behind that of its competitors.
Moreover, Tesla’s stock has not escaped the downturn, demonstrating a 12% drop this year, in stark contrast to a mere 1% decline in the broader Nasdaq index. The company’s sales across Europe also present a bleak picture, with data revealing a nearly 50% drop in monthly sales in April compared to the same month last year, a continuation of sharp sales declines observed in the first quarter.
The group of investors arguing for change includes influential entities such as the SOC Investment Group, the American Federation of Teachers, New York City Comptroller Brad Lander, and Oregon State Treasurer Elizabeth Steiner. They place blame on the Tesla board, which they assert has been reluctant to act in the best interests of shareholders by failing to ensure Musk’s unwavering commitment to the company. Musk has recently stated intentions to concentrate more on his various businesses, which encompass xAI and SpaceX in addition to Tesla, a diversification that could further stretch his focus away from the automaker.
In response to these investors’ demands, Tesla has signaled intentions to enhance its governance structure, with the recent announcement of former Chipotle CFO Jack Hartung joining the board. However, Hartung’s previous connections—including a relationship with Musk’s brother Kimbal Musk—have raised questions regarding the independence of board members, a concern the investors have emphasized in their letter.
As the situation develops, the implications for Tesla and its shareholders are profound. Investors are seeking reassurance that the company’s leadership is adequately addressing both operational and reputational challenges. Whether Musk can channel his energies effectively into Tesla amidst his various commitments remains to be seen, but failure to do so could result in further declines, both in market performance and public perception. The unfolding dynamic will be closely monitored by stakeholders eager for updates on Tesla’s governance policies and overall direction.