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Investors call on Tesla to restructure board in wake of SolarCity merger bid

An investor group is urging Tesla Motors Corp. to immediately add two independent members to its board of directors and split the chairman and CEO roles now held by entrepreneur Elon Musk.

The demand issued by CtW Investment Group, a Tesla shareholder that works with $250 billion in union-sponsored pension funds, highlights the concerns over the closely entangled management ties between Tesla and SolarCity, the solar energy systems installer that is the target of a $2.8 billion takeover bid from the electric vehicle manufacturer.

SolarCity has had five of its eight board members recuse themselves from making decisions on the Tesla deal because of their ties to either the company or Musk. The company formed a two-member independent board committee earlier this week. CtW also called on Tesla to appoint the two newly named independent directors it is seeking to a special board committee that would review the SolarCity deal.

Musk, in a conference call last week, said Tesla’s board had unanimously backed its SolarCity takeover bid. He has described the merger bid as a “no-brainer” that would create a sustainable energy powerhouse, combining Tesla’s electric vehicles with SolarCity’s solar power systems, with both products using the batteries that Tesla will begin making at its Nevada gigafactory.

Musk, the largest shareholder in both companies, owns 21 percent of Tesla and 22 percent of SolarCity. Musk is Tesla’s chairman and CEO, as well as SolarCity’s chairman. He is the cousin of SolarCity CEO Lyndon Rive and his brother, Peter, SolarCity’s chief technology officer. Both Rives serve on SolarCity’s board and have recused themselves. Musk and investor Antonio Gracias, who serve on both the Tesla and SolarCity boards, also have recused themselves.

Also on the Tesla board is Musk’s brother, Kimbal, who also is a director at Musk’s SpaceX business. Brad Buss, a former SolarCity chief financial officer, serves on the Tesla board. Tesla director Stephen Jurvetson is the representative of venture capital firm Draper Fisher Jurvetson, which also is a major investor in SolarCity. Jurvetson’s partner, John Fisher, serves on the SolarCity board.

Another Tesla director, Ira Ehrenpreis, is a manager at venture capital firm DBL partners, which also has investments in SpaceX and SolarCity. Ehrenpreis’ partner, Nancy Pfund, previously served on Tesla’s board and is a SolarCity director.

That leaves Robyn Denholm, a former chief financial and operations officer at Juniper Networks, as the only Tesla director without ties to SolarCity, CtW Executive Director Dieter Waizenegger noted in a letter to the Tesla board.

Pfund and another SolarCity director – money manager Donald Kendall Jr. – were named this week as the two members of a SolarCity board committee evaluating the Tesla bid.