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Since Tesla Motors (TSLA 12.06%) offered to buy SolarCity (SCTY.DL) last week, the solar installer has made steps toward evaluating the offer. However, the process has unveiled some strange and potentially troubling relationships between the two companies.

SolarCity's board of directors is so rife with conflicts that the special committee of independent directors that will evaluate the deal consists of just two people -- one of whom was an early investor in Tesla Motors -- and five of the eight board members have recused themselves from voting on the deal at all.

And that's just to start. Here's a look at the board of directors members and their conflicts.

SolarCity's conflicted board

The clearest conflict is Elon Musk himself, who is CEO of Tesla Motors and chairman of the board at SolarCity, besides being the largest shareholder in both companies. However, the other conflicts are important as well.   

  • Elon Musk: Largest shareholder in both SolarCity and Tesla Motors. SolarCity's Chairman of the Board and Tesla Motors' CEO. Recused from vote.
  • Lyndon Rive: CEO of SolarCity and Elon Musk's cousin. Recused from vote.
  • Peter Rive: Co-founder and CTO of SolarCity and Lyndon Rive's brother, also Elon Musk's cousin. Recused from vote.
  • John H.N. Fisher: Early investor in both companies and investment firm partner Stephen Jurvetson sits on the board at Tesla Motors. Not recused from vote.
  • Antonio Gracias: Director at Tesla Motors and an early venture capital investor in both companies. Recused from vote.  
  • Donald R. Kendall Jr: The only director without a tie to Tesla Motors. Has not recused himself from the vote and is on the special committee to evaluate the Tesla Motors proposal.
  • Nancy E. Pfund: Former board member at Tesla Motors and early investor in both companies. Investment firm partner Ira Ehrenpreis still sits on Tesla Motors' board of directors. Has not recused herself from the vote and is on the special committee to evaluate the Tesla Motors proposal.
  • JB Straubel: Co-founder of Tesla Motors and the company's current CTO. Recused from vote.

That leaves John H.N. Fisher, Nancy E. Pfund, and Donald R. Kendall as the three directors who aren't recusing themselves from the vote for or against the merger, although two of them have ties to Tesla Motors through their investment funds. The special committee to evaluate the deal has just two members, Kendall and Pfund, despite Pfund's ties to Tesla Motors.

The difficulty in evaluating a merger

Investors should know about this because the board of directors is supposed to guide a company independently and give advice to shareholders based on independent opinions. Given the small number of directors evaluating the deal -- and who hasn't recused themselves from the vote -- it's worth wondering about the board of directors' independence.

None of this is to say the directors won't demand the best deal possible. Particularly investment companies who have a stake in SolarCity's success and the Rive brothers, who have considerable financial and sweat equity in building the solar installer. At the end of the day, the deal may come down to a vote from shareholders. That's who may make the final call on if SolarCity stays independent or becomes part of Tesla Motors' energy vision.