Oversight of Elon Musk remains key challenge
By Rolfe Winkler and Tim Higgins
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (December 29, 2018).
Tesla Inc. named a pair of new independent directors --
including Oracle Corp. Chairman and tech-industry luminary Larry
Ellison -- to a board that has been under fire for its oversight of
Chief Executive Elon Musk.
Tesla said Mr. Ellison, who has been a public booster of the
electric-car maker, and Kathleen Wilson-Thompson, the global head
of human resources for Walgreens Boots Alliance Inc., joined its
board on Thursday.
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 auto maker private.
The additions bring to 10 the number of active directors on
Tesla's board, which last year added two other outsiders to a group
stacked with longtime Musk allies. An 11th director has been on
leave since last year.
The naming of Mr. Ellison and Ms. Wilson-Thompson follows the
elevation to chairman in November of Robyn Denholm, a veteran
finance executive who joined Tesla's board four years ago. The
replacement of Mr. Musk as chairman 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
at an Oracle analysts' conference in which he lashed out at critics
of the Tesla chief's management.
Tesla said on Friday that Mr. Ellison had purchased 3 million
shares in Tesla earlier this year. That translates to about $1
billion at the stock's current price.
Ms. Wilson-Thompson was a 17-year veteran of Kellogg Co. before
joining Walgreens in 2010. She serves on two other boards, at
construction materials company Vulcan Materials Co. and
specialty-chemicals supplier Ashland Global Holdings Inc.
"Larry Ellison is a business icon, but smart investors will
probably ask a handful of questions," said Adam Epstein, head of
corporate-governance consultants Third Creek Advisors, including
"If this is yet another 'friend' of Elon's how does that help me as
an investor?" Mr. Epstein also questioned whether Mr. Ellison, who
is also Oracle's chief technology officer, has the time to devote
to his duties as a Tesla director.
Tesla's board said it had conducted a widespread search. "In
Larry and Kathleen, we have added a pre-eminent entrepreneur and a
human resources leader, both of whom have a passion for sustainable
energy," the board said Friday.
Shareholders and activist groups have 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 point 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 Mr. Musk didn't have funding secured,
while he said he believed he did.
In addition to the board changes, the settlement also called for
Tesla to add oversight of Mr. Musk's communications that are
potentially material to the company's share price.
Tesla's stock rose 6% to $333.87 Friday, but is still down about
14% from its August peak.
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.
Tesla's board includes Mr. Musk and his brother, Kimbal, as well
as Brad Buss, former finance chief at SolarCity, a company Mr. Musk
led and that Tesla acquired in 2016, and Antonio Gracias and Ira
Ehrenpreis, investors who also have backed SpaceX, Mr. Musk's
rocket company. 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 is how tightly Tesla's reputation is
intertwined with Mr. Musk's. He also is the largest single
shareholder, and analysts question whether the company would
struggle to raise new capital if he were ever to leave the
board.
Tesla over the past two years has struggled to realize Mr.
Musk's vision for a mainstream electric car. The Model 3 has been
praised by reviewers but was harder to manufacture than Mr. Musk
expected, leading to delays. Tesla reached the goal of making 5,000
Model 3s in a single week at the end of the second quarter and
turned a profit in the third quarter but still isn't offering a
promised 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 29, 2018 02:47 ET (07:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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