Tesla Names Robyn Denholm as Chairwoman, Succeeding Elon Musk

Posted November 8, 2018 7:59 p.m. EST
Updated November 8, 2018 8:00 p.m. EST

Six weeks after settling a securities-fraud lawsuit with federal regulators, Tesla and Elon Musk have made good on one of the agreement’s key provisions — naming a new board chief to impose order on a company whose automaking has often been overshadowed by Musk’s behavior.

The company said a current director, Robyn Denholm, would become its chairwoman immediately. Musk stepped down as chairman last month but remains Tesla’s chief executive.

Denholm, 55, is the chief financial officer of Telstra, which dominates telecommunications in Australia. She is a longtime technology executive with experience in Silicon Valley, where Tesla is based, and once worked for Toyota in Australia.

The move to replace Musk as chairman, announced late Wednesday night, was part of a settlement reached with the Securities and Exchange Commission in September to deal with the fallout from his assertion that he had secured funding for a private buyout of the company. That claim, in a Twitter post in August, quickly fell into doubt. (Musk later explained in a blog post that discussions with Saudi Arabia’s sovereign wealth fund led him to believe that it had both money and enthusiasm for such a deal.)

Under the settlement, Tesla agreed to name a new leader for the board, splitting those responsibilities from Musk’s post as chief executive, by next Tuesday.

The company was also required to add two independent board members and to set up a permanent committee to monitor Musk’s public declarations, including his Twitter posts. It has several weeks to complete that requirement.

Erik Gordon, a professor at the University of Michigan’s Ross School of Business, said the appointment of Denholm “technically complies” with the SEC settlement, but he questioned how much Denholm would be able to push back against a forceful personality like Musk.

“If the goal is to provide adult supervision, it won’t accomplish that,” Gordon said. “She’s been on the board through all of the shenanigans. She never resigned in protest. She is a Musk supporter. If it doesn’t work out, she will be the one who leaves. It won’t be Musk who leaves.”

Musk has galvanized investors and the public imagination with his sleek electric cars and his big dreams for space travel and other ambitions. But his public declarations increasingly unnerved Tesla shareholders and the directors who represent them. Production problems only added to those concerns.

Tesla reported a substantial profit in the third quarter, powered by a significant jump in production and sales of its Model 3 sedan. The earnings beat the expectations of many analysts and eased worries about its finances, for now. In the first half of 2018, the company reported losses and used up more than $1 billion in cash.

“They are doing much better than we thought they would a quarter ago,” said Jeffrey Sonnenfeld, a professor at the Yale School of Management. “You have to give them credit for that.”

Yet Tesla still faces challenges. It must prove it can sustain profits in the fourth quarter and beyond, pay out more than $1 billion to bondholders over the next few months, address quality issues and fix a chaotic delivery system.

Tesla has also had an exodus of senior executives. It has had three chief accounting officers this year. And while the fraud suit with the SEC has been settled, Tesla’s past production forecasts for the Model 3 are still being examined by the agency.

“In just about every area, they’ve had extraordinary volatility,” Sonnenfeld said.

David Whiston, an analyst at Morningstar who follows Tesla, said the appointment of Denholm was a “a good balance” and was probably best for Tesla’s stock price. Bringing in a hard-nosed outsider “who wouldn’t put up with Elon’s Twitter nonsense,” he added, “would clash with Elon and it wouldn’t work at all.”

Tesla shares rose almost 1 percent Thursday.

Still, Whiston also expressed doubts about how much Denholm will be able to constrain Musk. In the past few weeks, the chief executive referred to the SEC on Twitter as the “Shortseller Enrichment Commission,” and then announced that he no longer had a title at Tesla, raising questions about whether he would continue to have the final word, even with a new leader of the board.

“It’s troubling to me that since the settlement, Elon has already made a mockery of the SEC twice,” Whiston said. He said Musk should “stop playing games and just make the darn cars.”

Denholm, a Tesla director since 2014, is one of nine members of a board whose independence has been an issue. In June, shareholders put forward proposals to split the jobs of chief executive and chairman and to deny re-election to some incumbent directors — including Musk’s brother, Kimbal. Tesla said the measures were overwhelmingly rejected. Musk himself holds about one-fifth of the company’s shares.

Sonnenfeld said he would have preferred to see Tesla name a chairman with deep automotive experience, like Alan Mulally or Mark Fields, both former Ford Motor chief executives. “It would do them good to get somebody who knows how to run the production process without sleeping on the factory floor,” he said.

Denholm’s exposure to the auto industry came in her seven years at Toyota Motor Corporation Australia, where she was national manager for finance, before leaving in 1996 for Sun Microsystems, a onetime Silicon Valley powerhouse later acquired by Oracle.

Before her current position at Telstra, Denholm was an executive at Juniper Networks, which makes computer networking equipment, for about a decade. She has both Australian and American citizenship. Tesla said Denholm would step down from her role at Telstra once her six-month notice period is complete.

Whiston said Denholm’s plan to leave Telstra “shows commitment to Tesla to make sure this oversight is done properly.” But Gordon cautioned that once she left her Telstra position, being chairwoman of Tesla “will be her full-time gig,” making her less likely to confront Musk. “It will be a job she doesn’t want to lose,” he said.

Musk heralded the change in typical fashion — on Twitter.

In the Tesla announcement, Musk cited Denholm’s experience and years with his company. “Robyn has extensive experience in both the tech and auto industries, and she has made significant contributions as a Tesla board member over the past four years in helping us become a profitable company,” he said. “I look forward to working even more closely with Robyn as we continue accelerating the advent of sustainable energy.” In August, Musk told The New York Times that this year “has been the most difficult and painful year of my career,” in part because of the pressure of running Tesla, and that he sometimes took the insomnia drug Ambien to sleep. Some board members worried the drug was contributing to his late-night Twitter sessions.

In addition to his troublesome tweet about a buyout, Musk had a nasty social media battle with a British diver involved in the daring rescue of 12 boys in a flooded cave in Thailand over the summer — a spat he had to quickly walk back.

In September, he appeared to briefly smoke marijuana during an interview with Joe Rogan, a comedian. The interview took place in California, where recreational marijuana use is legal.

Now the question is whether Musk can conform to the more conventional corporate culture that Denholm is meant to represent.