While CEO Elon Musk has been a focal point of criticism surrounding the Tesla corporate structure, the Board itself has also faced scrutiny, particularly during the stock downturn in the previous year. In response to mounting pressure and numerous applications, Tesla has taken the step to implement a new rule governing the nomination of Directors to the Board.

As first observed by Sawyer Merritt on Twitter, Tesla has recently made a notable modification to its rules, which is outlined in a comprehensive 8-K filing with the United States Securities and Exchange Commission (SEC). The filing elucidates the updated guidelines for nominating and qualifying Board members within Tesla, providing clarity on the nomination process and the requisite qualifications that candidates must fulfill.

As outlined in the filed 8-K document, Tesla has implemented a revised procedure for the nomination of Board members. Going forward, shareholders or a group of investors, totaling up to 20 individuals, who collectively possess a minimum of 3% of Tesla's outstanding shares for at least 3 years, are eligible to nominate candidates for the Board of Directors. The number of nominated Directors can represent either 2 seats or 20% of the total Board, whichever is greater at the time of nomination.

It should be noted that this updated nomination process does not guarantee a Board seat for the nominees. Once nominated and meeting the aforementioned criteria, the candidates will undergo a shareholder vote to determine their appointment. While there is technically no cap on the number of Board seats that Tesla can open, the nominees will be subject to the available seats under the 2-seat/20% rule.

This alteration to the Board's composition comes at a time when an increasing number of investors seek participation, coinciding with significant political and public uncertainty. Recent scrutiny has raised questions regarding the potential risk to the Tesla brand due to Elon Musk's controversial nature. Additionally, some government officials, possibly influenced by Elon Musk's controversial conduct, have raised concerns about the Board's ability and willingness to fulfill its fiduciary duty.