Ratings agency S&P on Wednesday lowered the management and governance score on EV giant Tesla Inc. (NASDAQ:TSLA) from neutral to moderately negative owing to company CEO Elon Musk‘s singly dominant role within the company.
What Happened: Musk’s role within the company increases key-person risk. This, coupled with the company’s exposure to lawsuits and lack of board effectiveness, spurred the downward revision, S&P said.
To reduce the key-man risk around the company, Tesla will have to increase board independence and nominate new independent directors with no strong ties to Musk, it recommended.
The agency is not the only one to flag concerns about Tesla’s board independence. Earlier this year, the Delaware Court of Chancery judge Kathaleen McCormick nullified the CEO’s 2018 pay package worth $56 billion at the time of grant after deeming it to be an unfathomable sum and the board of the company to be insufficiently independent of its CEO.
The agency, however, ...