Elon Musk’s replacement as Tesla chair, Robyn Denholm, faces task controlling erratic CEO


Posted

November 09, 2018 11:40:05

Australian Robyn Denholm brings much-needed financial and auto industry expertise to her new role as Tesla’s board chair, but her biggest challenge is whether she can rein in a chief executive with a proclivity for misbehaviour.

Key points:

  • Elon Musk’s frequent outbursts on Twitter have seen big drops in the Tesla share price
  • His demotion as chairman comes as a result of one of those, and is part of a deal with the SEC
  • Australian Robyn Denham brings strong experience in finance and the auto industry

Ms Denholm, who has been a Tesla board member for nearly five years, was named as Elon Musk’s replacement as part of a securities fraud settlement with US government regulators.

Corporate governance experts said they would have preferred an outsider with manufacturing expertise be appointed to lead the board, now dominated by people with personal and financial ties to Mr Musk, including his brother.

They are not sure if Ms Denholm was hired just to placate the Securities and Exchange Commission to comply with the settlement or whether she will actually be able to corral the visionary but erratic Mr Musk, who remains chief executive.

Ms Denholm, 55, is currently the chief financial officer and strategy head at Telstra, and has widespread experience working in Silicon Valley and for companies including Toyota.

Her new role at Tesla came largely because of the board’s failure to control Mr Musk, especially when he made a surprise announcement over Twitter in August that funding was secured to take Tesla private at $420 per share.

That drove up Tesla’s stock price and hurt short-sellers, investors who bet against the company’s success. Eventually it drew a lawsuit from the SEC alleging that Mr Musk misled investors.

The company’s stocks have also fallen at other times in 2018 due to outbursts by the Tesla founder.

In July, the company had more than $US2 billion wiped off its value after Mr Musk called one of the divers involved in the rescue of 12 Thai children from a cave a “pedo”.

In September, the company’s share price dropped 6 per cent after the billionaire smoked marijuana during a filmed podcast interview.

Experts question whether Musk can be muzzled

The move vaults Ms Denholm from relative obscurity into a high-profile position of trying to muzzle Mr Musk and manage a company that is struggling to produce vehicles and make money.

Under the settlement with the SEC, Tesla also is required to appoint two new independent directors, and it must review Mr Musk’s posts about the company on Twitter.

Mr Musk and Tesla each had to pay a $27.5 million penalty under the September deal with the SEC, and he cannot return as chairman for three years.

Even after the settlement was announced, Mr Musk taunted the SEC, calling it the “Shortseller Enrichment Commission” before snidely praising it for “doing incredible work”.

Charles Elson, director of the corporate governance centre at the University of Delaware, said Tesla should have brought in someone from outside.

He said no matter how talented Ms Denholm may be, and even though she appears to have fewer ties to Musk than other directors, she has a shadow over her of being on the board that did little as Mr Musk misbehaved.

“You really have got to wonder,” he said.

“No other CEO of any other public company would have survived this.”

Michael Cusumano, a professor at the Massachusetts Institute of Technology’s Sloan School of Management, further notes that Ms Denholm’s track record as a Tesla board member is not necessarily an indication of how she’ll be as a chairwoman.

“She’s had a ringside seat to the chaos and she didn’t or was not in a position to change anything,” Professor Cusumano said.

“All the information you are given comes from the CEO, COO, CFO,” he said.

“It really is a restricted position. So I don’t think we can say that, well, she was ineffective as a director, the whole board was ineffective, so she’s likely to be ineffective as chairwoman.”

On Twitter, Mr Musk wrote that he had great respect for Ms Denholm.

“Very much look forward to working together,” he wrote.

AP

Topics:

business-economics-and-finance,

corporate-governance,

united-states,

australia



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