The Regulator of Companies and Organizations in the US namely Securities & Exchange Commission (SEC) hasn’t taken any notice yet, but experts are saying Tesla violated rules of corporate governance. The problem noted is the conflict of interest as a board member approving Bitcoin investment was also a key member of two widely known crypto entities involved in Bitcoin trade.
Since Tesla Inc. has brought forward its fresh investment into Bitcoin, entire world is appraising Elon Musk’s initiative who is working as Tesla’s CEO. But howsoever good or bad was the investment, the question is whether the required formalities were followed or not. After the investment, someone has pointed out that one of the key Board members of Tesla might be igniting conflict of interest.
It was reported that amongst Tesla’s board members there was one director who also sanctioned the investment is involved in conflict of interest. It was pointed out that one of the directors also happens to be a director of two globally renowned crypto trading platforms. Antonio Gracias is one such director of Tesla who also approved company’s resolution to invest. However, Gracias has been acting only in the capacity of an independent director on the Board of Directors of Tesla. He was also part of the audit committee of Tesla constituted to execute 1.5 Billion Dollar Bitcoin invest deal.
According to Gracias past history, he and Musk, both have been friends for a very long time. It was in the year 2005 when Gracias started to invest in Tesla and in 2007 became a member on the Board of Directors of Tesla.
He is also widely known for founding Valor Equity Partners wherein he is currently securing posts of CEO and CIO. This Valor Equity Partners has thereafter further invested in two major crypto oriented companies namely Bitgo and Erisx.
It was recently published that Gracias served on the Board of yet another company called Harbor which was involved in tokenized crypto trading. However, Harbor was duly taken by Bitgo in an acquisition in the year 2020. This shows that there is a genuine case of violation of rules of corporate governance under company laws. It was suggested that Gracias should have, on his own, recused himself from sitting on the decision.
The quorum of the board meeting should also have been completed even if Gracias had recused himself. Instead, he was part of the decision making team, duly sanctioned the investment and of course was director of two crypto companies. The allegation against Gracias in particular is that Tesla invested 1.5 Billion dollars into Bitcoin. Being a director of crypto companies which too offer Bitcoin trading, therefore, has the possibility of involving conflict of interest.
Yet there hasn’t been any action taken by SEC or any other authority nor even by any private complainant. However, the issue has enough material to prove violation of corporate governance rules where Tesla has failed to implement prudence.