BlackRock voted to replace Tesla's Musk with independent chairman

Funds run by BlackRock Inc voted in favor of a recent shareholder proposal that would have required Tesla Inc to replace Elon Musk with an independent chairman.

BlackRock-managed funds voted for a measure requiring the chairman be an independent director, according to BlackRock’s filing with the U.S. Securities and Exchange Commission on Thursday. The proposal, which was defeated, would not have affected Musk’s standing as Tesla’s chief executive officer.

More than 86 million shares voted against the proposal at a shareholder meeting in June, while fewer than 17 million voted in favor, Tesla said.

Some corporate governance activists call for the chairman and CEO roles to be split between two people to improve oversight, and the new filing revealed at least one major investor backed such changes at Tesla. BlackRock’s role in backing the proposal was not previously reported.

Musk has been under pressure over the company’s spending and after tweeting on Aug. 7 that he planned to take the company private, only to abandon the idea by Aug. 24.

Tesla’s board had said that the company’s success “would not have been possible” without Musk’s “day-to-day exposure to the company’s business.”

Yet top proxy adviser Institutional Shareholder Services Inc supported the proposal, citing concerns about Musk’s pay and board independence.

“BlackRock’s approach to investment stewardship is driven by our fiduciary duties to our clients, the asset owners,” a BlackRock spokeswoman said in an emailed statement. “Our approach to engaging with companies and proxy voting activities is consistent with our commitment to drive long term shareholder value for our clients.”

BlackRock funds are a top-10 Tesla stockholder, controlling nearly 6.5 million of Tesla’s 170 million shares, according to Thomson Reuters data based on public filings.

Vanguard Group Inc-run funds voted against the independent-chair proposal, a recent filing showed. Funds run by Fidelity Investments sided with Tesla on director votes and other controversial items this spring, its filings showed.

BlackRock’s report also showed it voted this year in favor of shareholder proposals at Facebook Inc and Google parent Alphabet Inc to give each shareholder an equal vote on governance matters.

Some companies are structured in a way that gives some shareholders more power than others, regardless of how many shares they hold.

BlackRock withheld votes or voted against nearly all management recommendations at Netflix Inc, including an advisory vote on executive pay.

Reporting by Trevor Hunnicutt; Additional reporting by Ross Kerber; Editing by Cynthia Osterman and Muralikumar Anantharaman