Tesla's Governance Crossroads: Why State Treasurers are Demanding Accountability

The eight U.S. state treasurers who wrote to Tesla’s board in April 2025 did so not merely as shareholders, but as stewards of public pension funds and economic stability. Their letters, coordinated with the advocacy group Americans for Responsible Growth, exposed a confluence of governance failures, financial missteps, and strategic distractions that threaten Tesla’s future—and the broader clean energy transition it once symbolized.

At the heart of their concerns lies Tesla’s declining performance. By early 2025, its stock had plummeted over 50% from its December 2024 peak, erasing over $600 billion in market value. First-quarter 2025 profits fell 71% year-over-year to $19.34 billion, while vehicle deliveries missed targets for the second consecutive quarter. Competitors like BYD and Xiaomi, leveraging China’s massive EV market, were outpacing Tesla in trade-ins and sales.

But the deeper issue, the treasurers argued, was leadership. CEO Elon Musk’s simultaneous roles at X, Neuralink, SpaceX, and as head of the Department of Government Efficiency (DOGE)—a federal agency under President Trump—drew scrutiny. The treasurers questioned whether Musk’s divided focus could address Tesla’s operational struggles, particularly as his political ventures sparked global backlash. Protests and vandalism targeting Tesla facilities in California and Texas, linked to his controversial policies like DOGE’s proposed cuts to Medicare funding, underscored the reputational risk.

The board’s complicity was equally problematic. Despite a $55 billion shareholder lawsuit over Musk’s 2018 pay package—which Delaware courts twice ruled excessive—the board had offered no meaningful oversight. Compensation for directors, including Chair Robyn Denholm, totaled $1 billion in returns tied to Musk’s equity incentives, raising allegations of self-dealing. “The board’s silence signals it is entirely under Musk’s control,” wrote California State Controller Betty Yee.

The treasurers demanded three critical answers:
1. Leadership Accountability: How will Tesla ensure Musk and its executives prioritize resolving operational and financial crises?
2. Compensation Alignment: Will the board revise executive pay structures to reflect underperformance?
3. Strategic Clarity: What transparent plan will rebuild investor and public trust?

Regulatory and macroeconomic risks amplified the urgency. Tesla’s role as a linchpin in the clean energy economy means its struggles threaten regional economies, particularly in states like California, which hosts Tesla’s manufacturing hubs. A stalled EV market could also delay progress toward climate targets. Meanwhile, Musk’s political alignment with the Trump administration drew bipartisan criticism, alienating both liberal consumers and conservative policymakers.

Institutional investors piled on pressure. New York City Comptroller Brad Lander called for securities litigation against Tesla’s board, citing fiduciary failures. Danish pension fund AkademikerPension and Canadian unions threatened to divest holdings unless governance improved. Even Tesla’s $40 billion in cash reserves could not insulate it from a liquidity crisis if losses worsened.

The stakes are existential. Tesla’s market cap, now below $700 billion, reflects investor skepticism about its ability to navigate its self-inflicted governance crisis and intensifying competition. Barclays analysts projected Tesla’s auto business profit margin would hit a historic low in 2025, while trade-in rates surged 20% as customers shifted to cheaper, faster-charging Chinese models.

Yet Tesla’s potential remains undeniable. Its software-driven vehicles, energy storage systems, and robotics ambitions could still dominate emerging markets—if leadership and governance stabilize. The board’s response to the treasurers’ demands will determine whether Tesla becomes a cautionary tale of unchecked ambition or a reformed industry leader.

Conclusion: The state treasurers’ intervention signals a breaking point for Tesla’s governance model. With profits down 71%, stock value halved, and institutional investors threatening divestment, the board must choose: double down on Musk’s vision—or confront the systemic risks undermining Tesla’s future. The company’s ability to reconcile its visionary goals with disciplined leadership will decide its place in the next chapter of the EV revolution. For now, the odds favor caution: reveal a trajectory too fragile to ignore.