A review of Tesla’s Corporate Watchdog Report reveals a striking red flag regarding management turnover, specifically in the CFO position. The Tesla red flag for CFO turnover is recent and highly unusual. Rare, in fact.
Here is how Tesla’s Corporate Watchdog Report shows the CFO change:
Corporate Watchdog Report reviews each change in the CEO and CFO position because those two positions can have a disproportionate effect on a company’s financials. We grade each change with either a yellow warning sign or a red flag. Changes in these positions will always receive a red flag if the change in position is due to certain reasons, such as disagreement with management or policies, an executive dismissed for cause, or for determined or suspected wrongdoing. Additionally, a red flag will be assigned if there have been two or more changes in these positions within a three-year window, such as the case here. This rapid change in the CFO position is the reason that triggered Tesla’s red flag. In Tesla’s case, there were two changes in CFO within just 18 months.
Tesla’s case is even more unusual than it might first appear. Not only were there two CFO changes within a year and a half, but the former CFO returned to his position as a permanent CFO.
How unusual is it for the same person to be re-appointed permanent CFO in the same company after a departure?
To answer this question, we asked our Watchdog Research team how often the same person was re-appointed to the CFO position in the same company. We reviewed over 12,000 filings with the SEC (mostly 8-K or 8-K/A’s) from 2013 to 2018. We identified 56 instances in which the same person was re-appointed to the CFO position at the same company.
Here is a table with the results of our analysis.
| Reason | Filings |
|---|---|
| Interim | 37 |
| Merger / Acquisition | 5 |
| Assuming Additional Position(s) | 4 |
| Position Change within Company | 3 |
| Changed Date of Appointment | 3 |
| Change in Title | 2 |
| Change in Control | 1 |
| Corporate Restructuring | 1 |
| Total | 56 |
| Population | 12,894 |
Most commonly, the same person is appointed CFO in the same company when the Interim CFO is retained as the permanent CFO. Other filings can be explained as changes in responsibility or corporate restructurings.
We also asked how often the same person was appointed to the CFO position in the same company after departing. Starting with the same population, we looked for appointments following departures.
In Tesla’s case, Deepak Ahuja actually left the company when Jason Wheeler was CFO, not “resigning” but “retiring.” In interim, he served as a board director for FireEye, Inc. before returning to Tesla in March of 2017.
There have been only four other cases in which a retired CFO returned to position since 2013. In all cases, the former CFO came out of retirement to serve as an Interim CFO until a suitable replacement is found.
Except for Tesla.
Tesla is the only case in which, after a suitable replacement had been found, then left, and the former CFO returned to his former position, not as Interim, but as the permanent executive going forward.
The turnover in the CFO position at Tesla is highly unusual and should be something all shareholders know about and consider. Tesla’s current market cap is about $50 billion dollars. That covers a lot of retirement college saving and retirement accounts.
Fiduciaries or advisers with a suitability obligation should inform clients who hold Tesla of this potentially troubling risk. The odd occurrence of the CFO changes suggests that there is legitimate concern whether Telsa is a suitable investment for many investors with low risk tolerance.
Fiduciaries and brokers who subscribe to the Corporate Watchdog Report can download a full-copy of the Tesla Corporate Watchdog Report and distribute up to 500 copies of the report to their current and prospective clients. If you wish to distribute the report more broadly, please contact us at 855-820-6272.