According to a recent regulatory paperwork filing, Tesla will hold its next shareholder meeting at the Gigafactory in Fremont, California, on October 7. During the meeting, it will propose changes to the board of directors that will include a reduction of term length from three years to two years. It will also propose reducing the number of board members from nine people to eight.
Tesla’s board of directors are currently divided into three groups, each of which are up for election on a staggered schedule of every three years. This is similar in structure to the U.S. Senate, in which members serve six-year terms and 1/3 of its members are up for reelection every two years.
Board member Antonio Gracias has announced that he will not seek re-election when his term is up this year. Gracias is a venture capitalist who has been on Tesla’s board of directors since 2007. If the proposed changes to the board of directors are approved by shareholders, his seat would simply be eliminated rather than filled.
The company’s proposal to reduce the terms was a response to a similar proposal that will reduce board members’ terms to one year if it passes. Tesla says that its counterproposal “strikes a suitable balance to the long-term interests of and nearer-term accountability to our stockholders at this time.”
Elon Musk did have to give up his position as president of the board of directors as part of a settlement with U.S. regulators due to a Tweet in which Musk floated the idea of taking Tesla private. This would have eliminated the need to have a board of directors or even any accountability to shareholders at all. The FCC, however, said that the Tweet violated securities-related regulation because it could have been seen as manipulating the market.
Musk has since said that it would be impossible to take Tesla private due to the respectable increase in the value of Tesla shares (NASDAQ:TSLA) over the past couple of years. Although the gains have slowed in 2021 after a 2020 blitz in which Tesla started posting profitable quarters and delivered a company record-setting 499,550 vehicles, the gains were enough to qualify TSLA for inclusion in the S&P 500 index.
The FCC has not banned Musk’s family members from being members of the board, however. Fellow board members whose terms are up this year are James Murdoch, a son of News Corp founder Rupert Murdoch, and CEO Elon Musk’s brother, Kimball Musk. The board has nominated them for reelection. If the changes to the term lengths are approved, their next terms will end in 2023.