December 19, 2022

Senator Warren Questions Tesla Board Chairman on Conflicts of Interest with Elon Musk’s Takeover of Twitter

Board Has Fiduciary Duty to its Company, Workers and Shareholders, and Legal Responsibility to Address Risks Posed to Tesla by Musk Musk cannot treat Tesla as a “private plaything…the basic structure of Mr. Musk’s deal to buy Twitter, and his actions since becoming CEO, raise a number of concerns”

Text of Letter (PDF)

Washington, D.C. — United States Senator Elizabeth Warren (D-Mass.) sent a letter to Tesla Board Chairman Robyn Denholm raising concerns that its Board of Directors has failed to meet its legal responsibility to protect Tesla and uphold its fiduciary duty to shareholders from actions by Tesla Chief Executive Officer Elon Musk in the aftermath of his purchase of Twitter.

“Your legal responsibility is to serve as a prudent fiduciary for shareholders and to oversee the management of [Tesla’s] business. That responsibility includes ensuring that Mr. Musk is an effective CEO and that he fulfills his legal obligation to act in the best interests of Tesla and all of its shareholders, not just himself,” wrote Senator Warren “The fact that Mr. Musk was, until recently, the world’s richest man does not absolve him of those legal responsibilities or provide assurances that he will meet them.”

In October 2022, Elon Musk purchased Twitter for $44 billion and almost immediately, thousands of employees were laid off, including key compliance, privacy and security executives. And since Mr. Musk’s takeover of Twitter, Tesla’s stock has dropped rapidly, partly due to concerns about his use of Tesla stock as collateral on loans for Twitter and about his ability to serve as CEO of both simultaneously. 

“Despite widespread concerns about Mr. Musk’s acquisition of Twitter while serving as CEO of Tesla, it remains unclear whether the Tesla Board – which has key decision-making authority within the company – is adequately governing the company or if it has established clear rules and policies to address the risks to Tesla posed by Mr. Musk’s dual roles,” wrote Senator Warren. 

Following his takeover of Twitter, it was reported that Mr. Musk had brought in more than 50 Tesla employees, raising questions about misappropriation of Tesla resources and a potential violation of SEC rules, potentially violating SEC ‘antitunneling’ rules that aim to prevent corporate insiders from extracting resources from their firms.”

Mr. Musk has also failed to explain how he plans to manage the clear conflicts of interest between his role as CEO of Twitter, which relies on rival automobile companies for advertising revenues, and his position at Tesla. 

“Twitter relies on advertising revenue from automobile companies that are in direct competition with Tesla, including Audi, Chevrolet, Ford, GM, Jeep, and Volkswagen,” wrote Senator Warren. “As the owner of Twitter, Mr. Musk may decide to run the company to maximize badly-needed revenue, even if that includes great deals for Tesla’s competitors and potential injury to Tesla.”

Senator Warren is seeking detailed information on how the Tesla Board is monitoring these conflicts of interest and Mr. Musk’s appropriation of Tesla assets to Twitter, what guidelines the Tesla Board has put in place to protect Tesla, and how the Board is enforcing those guidelines no later than January 3, 2022.