By Dana Hull
Tesla Inc. appointed a director who's been on its board for years to replace Elon Musk as chairman, stirring suspicion as to whether the mercurial CEO will be restrained after costly run-ins with securities regulators.
Robyn Denholm, 55, will assume the chairman's role immediately. A director since 2014, she'll leave her position as chief financial officer and head of strategy at Australian telecommunications company Telstra Corp. after a six-month notice period.
The appointment marks the end of an era for Musk, 47, who became chairman when he led a $7.5 million initial investment in Tesla in April 2004. His problematic August tweets about trying to take the company private caused months of chaos and culminated in a settlement with the U.S. Securities and Exchange Commission. The agency sought to improve the governance of a board long criticized for being too closely aligned with its billionaire leader.
Once Denholm leaves Telstra, she'll be paid an annual cash retainer of $300,000 along with stock options, according to Tesla. Last year, she was the highest-compensated director on the board, making $4.9 million, with 99% of that coming in the form of option awards.
Tesla's board, which includes Musk's brother Kimbal, has long come under fire from corporate governance experts for lacking independence and being comprised of Musk loyalists.
Several are investors in or directors at SpaceX, the closely held rocket company that Musk also runs. That includes Steve Jurvetson, who's been on a leave of absence for roughly a year, since accusations of misconduct spurred his resignation from the venture capital firm he co-founded.
The new chairman isn't likely to influence Musk's behavior, said Frank Schwope, an analyst with NordLB in Germany.
"She's from Musk's inner circle and is unlikely to put obstacles in the way of decisions," Schwope said. "This exercise, brought on by the SEC deal, was to teach Musk a lesson and this is an easy way to fulfill the requirement."
Directors will create a permanent committee to ensure implementation of the terms of the SEC settlement, which include setting up procedures and controls to oversee Musk's communications -- including his tweets. Tesla has to employ or designate a securities lawyer to review messages that senior officers send through Twitter and other social media.
CtW and officials representing major pension funds in four states have called on Tesla to go beyond the terms of the SEC settlement to fix its corporate governance issues. In a letter last week, the group called for the creation and release of a plan to refresh the board and for timelines to be set for some members to leave.
— With assistance by Elisabeth Behrmann