TSLA Tesla Inc

By Rolfe Winkler and Tim Higgins 

Tesla Inc. named a pair of new independent directors -- including Oracle Corp. Chairman Larry Ellison, a tech-industry luminary who has been a public booster of the company -- to a board that has been under fire for its oversight of Chief Executive Elon Musk.

Tesla on Friday said that Mr. Ellison and Kathleen Wilson-Thompson, the global head of human resources for Walgreens Boots Alliance Inc., had joined its board effective the day before. Their addition fulfills the terms of Tesla's September agreement with the Securities and Exchange Commission to settle claims that Mr. Musk misled investors when he claimed this year to have funding to take the Silicon Valley car maker private.

The additions bring to 10 the number of active directors on Tesla's board, which in the past two years has added two other outsiders to a group stacked with longtime Musk allies. An 11th director has been on leave since last year. The additions follow the elevation in November of Robyn Denholm, a veteran finance executive who joined Tesla's board four years ago, to replace Mr. Musk as chairman, which fulfilled another requirement of the regulatory settlement.

Mr. Ellison, who co-founded enterprise software giant Oracle in 1977 and is one of the best-known executives in Silicon Valley, has expressed support for Mr. Musk, disclosing in October that Tesla was his second-largest personal investment. "I'm very close friends with Elon Musk, and I'm a big investor in Tesla," Mr. Ellison said in comments at an Oracle analysts' conference in which he defended the Tesla chief over questions about his management.

Tesla said on Friday that Mr. Ellison had purchased 3 million shares in Tesla earlier this year.

Ms. Wilson-Thompson was a 17-year veteran of Kellogg Co. before joining Walgreens in 2010. She serves on two other boards, including construction materials company Vulcan Materials Co. and specialty chemicals company Ashland Global Holdings Inc.

Tesla's board said it had conducted a widespread search for the new directors. "In Larry and Kathleen, we have added a preeminent entrepreneur and a human resources leader, both of whom have a passion for sustainable energy," the board said in a statement.

Shareholders and activist groups have long complained that Tesla's board lacks the independence to properly supervise Mr. Musk, whose success in building the company into a major producer of electric vehicles has been matched by his ability to stir controversy with sometimes outlandish statements. Critics also have pointed to Mr. Musk's history of making public forecasts for financial and operational performance that Tesla has failed to meet.

The September settlement resolved SEC claims that Mr. Musk deceived investors on Aug. 7 when he tweeted that he was considering taking Tesla private at $420 a share and had secured funding for the deal. Shares soared on the news only to plummet in the ensuing days when it became clear that a deal wasn't close to final. The SEC alleged that he didn't have funding secured, while Mr. Musk said he believed he did.

In addition to the board changes, that settlement also called for Tesla to add oversight of Mr. Musk's communications that are potentially material to its stock price.

Tesla's stock ended trading Thursday at $316.13, about 18% below its peak in August but nearly a third higher than its low point for the year.

Last month, a group of Tesla shareholders including state investment officials from New York, Connecticut, Oregon and California called on the board to make sweeping changes to its governance to enhance oversight of Mr. Musk.

Mr. Musk's penchant for unorthodox public statements has continued since the go-private tweet, including public derision of the SEC. "I want to be clear, I do not respect the SEC," Mr. Musk said in a recent "60 Minutes" interview, adding that he is abiding by the terms of the settlement "because I respect the justice system."

In his October comments, Mr. Ellison interrupted a discussion of Oracle's business to laud Mr. Musk and lash out at those who question him.

"This guy is landing rockets," Mr. Ellison said, referring to Mr. Musk's other major venture, Space Exploration Technologies Corp., or SpaceX. "He's landing rockets on robot drone rafts in the ocean, and you're saying he doesn't know what he's doing. Well, who else is landing a rocket? Do you ever land a rocket on a robot drone?"

Mr. Ellison has cultivated his own reputation as a maverick--one who, like Mr. Musk, is quick to spar with critics and rivals. And he has shown an inclination for loyalty to executives he respects, hiring Mark Hurd to be Oracle's co-president soon after Mr. Hurd resigned under pressure as chief executive of Oracle rival Hewlett-Packard.

Currently ranked as the fifth-richest American with a net worth of $58 billion, according to Forbes, Mr. Ellison also has been a flamboyantly big spender whose real-estate acquisitions include most of the Hawaiian island of Lanai. He once filed a lawsuit against neighbors in a tony section of San Francisco for allowing their trees to grow too tall, blocking views from his property. He and Mr. Musk share a fondness for ultra-expensive automobiles, both having owned McLaren super cars.

Messrs. Musk and Ellison also both have accepted large pay packages from their companies, in which they are large shareholders. Mr. Ellison was the most richly paid U.S. executive in the decade that ended in 2010, according to a Journal analysis.

Tesla shareholders earlier this year approved a pay package for Mr. Musk that could be worth $2.6 billion if the company meets certain targets.

A person close to Tesla said Mr. Ellison and Mr. Musk have met about five times over the years, in group settings, and have otherwise spoken or emailed infrequently.

Tesla's board includes Mr. Musk and his brother, Kimbal, as well as Antonio Gracias and Ira Ehrenpreis, investors who also have backed SpaceX, and Brad Buss, former chief financial officer at SolarCity, a company Mr. Musk led and that Tesla acquired in 2016. Another investor with close ties to Mr. Musk, Steve Jurvetson, has been on leave from Tesla's board since late 2017.

Tesla responded in July 2017 to criticism about the board's lack of independence by naming media executives James Murdoch and Linda Johnson Rice as directors. Mr. Murdoch is on the board of News Corp., parent company of The Wall Street Journal.

One challenge for the board in dealing with Mr. Musk is that Tesla's reputation is intertwined with Mr. Musk's. Shares have soared in recent years to give Tesla a market cap larger than General Motors Co., even though the Silicon Valley auto maker has never turned an annual profit and sells a fraction of the cars. Investors are enthused by Mr. Musk's vision of electric cars that are capable of driving themselves.

Mr. Musk is Tesla's largest single shareholder and analysts question whether the company would struggle to raise new capital if he were ever to leave the board.

The past two years have been trying for Tesla as it tried to realize Mr. Musk's long-pursued vision of bringing out a mainstream electric car. The Model 3 has been praised by reviewers but was harder to manufacture than Mr. Musk expected, leading to months of delays to increase production to a level that would generate the kinds of cash the CEO said was needed to avoid tapping the capital markets.

Tesla reached the goal of making 5,000 Model 3s in a single week at the end of the second quarter and turned a surprise profit in the third quarter. Tesla still hasn't reached its goal of offering a version of the Model 3 that starts at $35,000.

The appointment of Ms. Wilson-Thompson also brings Tesla into line with a recently enacted California law that requires public companies located in the state to have at least three female directors if their boards have six or more members.

Write to Rolfe Winkler at rolfe.winkler@wsj.com and Tim Higgins at Tim.Higgins@WSJ.com

(END) Dow Jones Newswires

December 28, 2018 11:21 ET (16:21 GMT)

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