March 21, 2024

Warren Renews Call for SEC Investigation of Tesla Board of Directors and Chief Executive, Elon Musk, Raises Fresh Conflict of Interest Concerns

“Mr. Musk’s recent public statements and actions have raised fresh concerns about conflicts of interest, the redirection of Tesla’s resources to Mr. Musk’s private companies, and other harms to Tesla shareholders.” 

Text of Letter (PDF)

Washington, D.C. – In a letter to Gary Gensler, Chair of the U.S. Securities and Exchange Commission (SEC), U.S. Senator Elizabeth Warren (D-Mass.) raised  new concerns related to her July 2023 call for the SEC to investigate Tesla’s Board of Directors (Board) and its Chief Executive Officer, Elon Musk. Warren’s initial letter raised concerns about possible misappropriation of Tesla resources and conflicts of interest related to Mr. Musk serving in dual roles at Tesla and X, formerly known as Twitter. The July 2023 letter also requested an investigation into possible violations of U.S. securities laws, including Nasdaq listing rules and SEC Rule 10b-5. 

In recent months, new evidence has emerged regarding Mr. Musk’s control over the Board and the Board’s failure to address Mr. Musk’s use of company resources for personal benefits rather than the interest of Tesla’s shareholders. For example, earlier this year, the Delaware Court of Chancery found that with regard to his $55.8 billion compensation plan, Musk has “enjoyed thick ties with the directors tasked with negotiating on behalf of Tesla, and dominated the process that led to board approval of his compensation plan.” The court further found that Musk’s large equity stake and deep personal and professional relationship with Board members raised significant concerns about the effectiveness of the Board’s corporate governance. In the context of his compensation agreement, the Court further found that “Musk controlled Tesla.” Shortly after the Delaware court decision, Musk transferred the state of incorporation for three of his businesses, including Tesla, out of Delaware. 

Warren writes that Musk’s recent public statements raise fresh concerns about conflicts of interest, the redirection of Tesla’s resources to Musk’s other private companies, and other harms to Tesla shareholders highlighted in her July 2023 letter. Just last month, Musk threatened to divert AI products away from Tesla even as he owns a private artificial intelligence company, xAI. The Board took no public action in response to this announcement. 

“The substantial holdings of several Tesla Board members in Musk’s private companies raise further concerns about the Board’s independence when Musk positions the interests of Tesla against that of his own private companies as he did in his January 15, 2024 post,” wrote Senator Warren. 

This is not the first time that potential conflicts have emerged between Mr. Musk’s relationship with Tesla and his private companies. Warren’s December 2022 letter to Tesla’s Board Chair expressed concerns about possible misappropriation of Tesla resources and requested an explanation on how it was addressing the corporate governance issues posed by Musk’s dual roles at Tesla and X. Warren received no responses to those questions. 

Musk has also created a pathway that would allow Tesla to channel money to X through paid advertising, which Tesla had never used to sell cars, just months after buying Twitter, which is highly dependent on advertising. In February 2024, Tesla launched its first paid video advertisement on X, raising further concerns that Mr. Musk may have acted based on his conflicts of interest, and that the Board may have breached their fiduciary duties to Tesla shareholders. 

“Despite the growing concerns posed by Mr. Musk’s conflicting roles at Tesla and his private companies, the Board appears to have taken no action to address these risks or protect its shareholders. The Board continues to operate as if Mr. Musk is the “Technoking” who can do no wrong,” continued Senator Warren. 

Senator Warren asks the SEC to consider a number of questions about whether Musk and the Tesla Board may have violated securities laws, including whether the Tesla Board accurately disclosed information about the Delaware case, conflicts of interest between Musk’s ownership in Tesla and other private companies, Musk’s decision to launch a paid advertising campaign for Tesla on X, and longstanding personal connections between Musk and the Tesla Board. 

Senator Warren has been a strong advocate for corporate oversight and accountability: 

  • In November 2023, Senators Elizabeth Warren, Sherrod Brown, Jon Tester, Tina Smith, and John Fetterman sent a letter to Gary Gensler, Chair of the U.S. Securities and Exchange Commission (SEC), urging him to issue rules requiring public companies to disclose their lobbying expenditures.

  • In October 2023, Senator Elizabeth Warren sent a letter to the Department of Justice (DOJ) asking them to immediately reverse its newly unveiled “safe harbor” policy that would provide a get-out-of-jail-free card for mergers involving corporate white-collar criminals – a betrayal of DOJ’s mission and a massive step backwards for the Biden administration’s fight against anticompetitive mergers.

  • In August 2023, Senator Elizabeth Warren and Representative Pramila Jayapal sent a letter to Ambassador Katherine Tai, Secretary of State Antony Blinken, and Secretary of Commerce Gina Rainmondo urging them to rebalance the trade advisory committee system to include the interests of of all pertinent stakeholders, including labor, environmental, and other public interests –  not just big business.

  • In July 2023, Senator Elizbeth Warren sent a letter to the Chair of the Securities and Exchange Commission (SEC), Gary Gensler, calling on the SEC to open an investigation into Tesla and the Tesla Board of Directors’ (Board) failure to manage the actions of CEO Elon Musk in his dual role as CEO of Twitter and Tesla. 

  • In June 2023, Senator Elizabeth Warren and Representative Katie Porter alongside Representatives Greg Casar, Jesus Garcia, Pramila Jayapal, and Jan Schakowsky sent a letter to Transportation Secretary Pete Buttigieg urging DOT to resist JetBlue’s misleading tactics to rig the Department of Transportation’s (DOT) evaluation of the airline’s application to consolidate with Spirit Airlines and urging DOT to block the merger. 

  • In June 2023, Senators Elizabeth Warren and Ron Wyden sent a letter to the Department of Justice (DOJ) raising serious concerns about the deal announced between the PGA Tour and the Saudi Arabian Public Investment Fund (PIF) to consolidate global golf-related business, including LIV Golf (LIV).

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