Tesla shareholders face staggering new hurdle after company enacts controversial policy: 'A formidable barrier'
Tesla raised the bar for shareholders to sue the company board or executives for breach of fiduciary duties.
The change took effect May 15 and requires an investor or group of investors to hold 3% of the electric vehicle maker's stock "to institute or maintain a derivative proceeding," CNBC reported. Tesla's market cap is $1.123 trillion, so a plaintiff would have to own shares worth $33.7 billion.
"Obviously, for a company of Tesla's size, that would be a formidable barrier to anyone bringing a lawsuit for breach of fiduciary duty," Tulane Law School's Ann Lipton told CNBC in an email.
The change was enabled by a Texas law that "allows corporations to limit shareholder lawsuits against insiders for breach of fiduciary duty," the outlet added. With shareholder approval, Tesla moved its incorporation site from Delaware to the Lone Star State in June 2024.
An investor who owned nine shares of Tesla stock sued the company in 2018, and CEO Elon Musk's $56 billion compensation package was revoked in January 2024.
Musk is by far the richest person on the planet, and his wealth makes him nearly untouchable. He helped to pioneer the EV movement by becoming an early investor in Tesla in 2003, and the company has been known for innovative technology and industry-leading breakthroughs.
Recently, however, the South African has drawn criticism for straying into American and European politics, including spending lavishly on the U.S. presidential election campaign of Donald Trump, leading government spending cuts as the head of the U.S. Department of Government Efficiency, and supporting the far-right Alternative for Germany party.
Activists have protested these actions, and Tesla charging stations, vehicles, and dealerships have been vandalized. Sales have plummeted, and Tesla stock spiraled downward, too, though it has regained much of its value.
This upheaval and the larger perception change of Musk from groundbreaker to villain could stifle the uptake of EVs, which is one of the many things necessary to slow the rapid rise of global temperatures caused by the burning of fossil fuels for energy.
It would take a massive coalition of shareholders to fight back against this move by Tesla, though companies are generally amenable to public pressure — especially when it comes to consumers' spending power. Tesla, for example, is shifting its focus from EV manufacturing to a robotaxi service and robotics to stabilize its future.
Musk has a history of not delivering on outlandish promises, but it has not significantly slowed the company or deterred its supporters.
What do you think of Tesla and Elon Musk?
Elon is the man
Love the company; hate the CEO
I'm not a fan of either
I don't have an opinion
Click your choice to see results and speak your mind.
Join our free newsletter for good news and useful tips, and don't miss this cool list of easy ways to help yourself while helping the planet.
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles


Forbes
27 minutes ago
- Forbes
What The CPI Inflation Numbers Mean For The Future
The Consumer Price Index numbers for May came out on Wednesday. The seasonally adjusted number was up 0.1% in May, a drop from April's 0.2%. except for March, it was the lowest monthly inflation figure since July 2024. Over the last 12 months, inflation was 2.4% before seasonal adjustment. There is volatility over time, but also a downward trend line, even if it hasn't dropped fast enough for people's tastes. Below is a graph from the Federal Reserve Bank of St. Louis, showing year-over-year comparisons. Year-over-year changes in the CPI Federal Reserve Bank of St. Louis The news was good, at least in theory and at a high level. At a more detailed look, perhaps not. Other issues — tariffs, rising deficit spending, and spending cuts for important common good activities — combine with inflation to create greater uncertainty in the near future and the potential for a recession. Here Are The CPI Details That Affect You CPI at the headline level sounds good. Details are, on the whole, more discouraging. Here are some product categories where inflation was much higher: All are necessities, if not for everyone, for many millions. Other items helped keep the headline inflation down: The moderating factors don't necessarily remove the burden of the items with greater inflation, depending on how households spend and experience inflation. Near Future Effects On Inflation 'Shelter and energy are going to keep the disinflation trend intact,' wrote Jamie Cox, managing partner for Harris Financial Group, in a note. 'Prices are moving down in two of the largest categories, so investors should expect further declines in inflation in the coming months. 'However, CPI remains above 2% and even though the tariff rates are going to be less than originally feared, after they are implemented, they will further increase the cost of goods,' wrote Chris Zaccarelli, chief investment officer for Northlight Asset Management, in a second note. 'Because of this and the tariff pause that's scheduled to be lifted next month, we are still cautious, but many of the risks that were present in early April, appear to be receding at this time.' As Oxford Economics noted, the May CPI data have been 'encouraging, but unlikely the new norm.' For example, the administration announced a temporary trade truce — again — with China following talks in London. This time, tariffs will be 55%. That's a blended number and includes 20% tariffs on fentanyl, a 10% reciprocal tariffs, and then an average 25% for tariffs already in place before this year, according to a MarketWatch report. The congressional spending bill is likely going to send spending and the deficit up, which will also provide inflationary pressure. While the headline numbers sound like a reprieve, it probably won't be ultimately.


Forbes
34 minutes ago
- Forbes
Microsoft Installs Emergency Update On Windows PCs
Emergency update is now being installed. Another month, another emergency update for Windows users. After issuing several out-of-band updates to address update fails in May (1,2), here we are again in June. Only now, 'this OOB update downloads and installs automatically,' Microsoft says. Per Windows Latest which was first to report the initial problem and the response, this follows the June update failing to install on some PCs, primarily those with Easy Anti Cheat gaming software. 'As we suspected, something seemed odd with Windows 11 24H2 KB5060842 when Microsoft had paused the rollout briefly.' That interlude allowed a patch to be applied to the standard update, but this didn't work. Instead Microsoft withheld the update from affected PCs, which will now receive the emergency update instead. 'Windows users likely didn't experience this issue,' the Windows-maker says, because the standard update was not offered to at-risk PCs. According to Windows Latest, users had reported that 'the update showed up, but kept failing with the message: 'Some update files are missing or have problems. We'll try to download the update again later. Error code: (0x80073712)'.' Microsoft then confirmed 'compatibility issues' and applied a fix. But when the fix also failed, 'Microsoft made the final call to yank the buggy patch (KB5060842) because it wouldn't install, and replace it with [the new emergency update] KB5063060.' It's now clear this 'major issue' with June's Patch Tuesday 'causes PCs to reboot unexpectedly when launching games using Easy Anti-Cheat, such as Fortnite.' The emergency replacement for the Patch Tuesday update includes all cumulative fixes as well as the compatibility workaround. Microsoft says the OOB update 'downloads and installs automatically from Windows Update and Microsoft Update on devices with Easy Anti-Cheat installed and on devices that have not installed KB506842 yet.'


CNBC
35 minutes ago
- CNBC
CNBC Sport: Candace Parker talks state of women's basketball, broadcasting and her new book
The CNBC Sport videocast brings you interviews with the biggest names in the business. In this week's episode, CNBC's Alex Sherman sits down with Candace Parker, 3-time WNBA champion and broadcaster. They discuss the state of men's and women's basketball, WNBA leadership, the upcoming collective bargaining agreement, her broadcasting roles and her new book, "The Can-Do Mindset." Watch the full conversation above, and sign up to receive future editions of the CNBC Sport newsletter straight to your inbox.