Advisor Drops Opposition to Tesla Director After Change in D&O Insurance

By | September 3, 2020

Proxy advisory firm Glass Lewis said late on Tuesday it had recommended Tesla Inc.’s investors to vote in favor of re-electing Chairwoman Robyn Denholm after having earlier opposed her re-election in June.

Glass Lewis said its recommendation changed due to the satisfactory action taken by Tesla regarding liability insurance for its directors.

Tesla will hold its annual shareholder meeting on Sept. 22.

Glass Lewis said it changed its recommendation due to the move by Tesla’s board to replace its earlier liability insurance policy with a 90-day interim arrangement to resume evaluating more traditional options for liability insurance.

Tesla Pays CEO Musk Nearly $1M for Controversial D&O Insurance Arrangement

The company is backtracking from plans to let Musk personally provide directors’ and officers’ insurance coverage for a year, as it disclosed in April. But while it seeks quotes from insurers, the CEO will provide up to $100 million of coverage.

CEO Musk Replaces Tesla’s D&O Policy with ‘Personal Coverage’

Musk cancelled his company’s directors and officers insurance (D&O), replacing it with a promise to personally provide his board members with “equivalent” coverage to what insurers would provide. Musk said he decided against renewing his D&O because the premiums quoted were “disproportionately high.”

In June, Glass Lewis had joined Institutional Shareholder Services Inc. (ISS) in opposing the chairwoman’s re-election to the board.

The recommendation was based on corporate governance concerns due to an insurance arrangement with Chief Executive Officer Elon Musk, after Tesla’s decision to not renew its liability policy for directors and officers over high premiums quoted by insurers.

“We are concerned that this D&O arrangement gives the company’s independent directors a direct, personal financial dependency upon the CEO they are tasked with overseeing,” Glass Lewis had said in its earlier recommendation.

On Tuesday, the proxy adviser said that while Glass Lewis still regarded the revised policy as “unorthodox and potentially conflicting,” it at least showed that Tesla responded to concerns from shareholders and related parties regarding the earlier policy.

“While we do not believe that recommending shareholder opposition to any director is warranted based solely on this issue at this time, we may recommend holding certain directors accountable should the company ultimately fail to commit to a less problematic D&O arrangement,” Glass Lewis said.

Denholm, a company director for nearly six years, was named Tesla chairwoman in November 2018 at a time when investors were demanding more robust oversight of Musk’s activities and public outbursts.

(Reporting by Kanishka Singh in Bengaluru; Editing by Subhranshu Sahu and Shailesh Kuber)

Top Photo: Elon Musk, Tesla Chairman, Product Architect and CEO. (AP Photo/Paul Sancya)

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