Australian telecommunications executive Robyn Denholm brings much-needed financial and auto industry expertise to her new role as Tesla’s board chairwoman, but her biggest challenge is whether she can rein in Elon Musk, a CEO with a proclivity for misbehavior.
This undated photo provided by Tesla Inc. shows Robyn Denholm. Tesla’s board has named one of its own as chairman to replace Elon Musk, complying with terms of a fraud settlement with U.S. securities regulators. The electric car and solar panel company’s board on Thursday, Nov. 8, 2018, named Australian telecommunications executive Denholm as chairman, effective immediately. (Tesla Inc. via AP)
Erik Gordon, a professor at the University of Michigan’s Ross School of Business, 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 told The New York Times. “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.”
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.”
Denholm, who has been a Tesla board member for nearly five years, was named to the post late Wednesday, replacing Elon Musk as part of a securities fraud settlement with U.S. government regulators.
Elon Musk out as Tesla chair, remains CEO in $40M SEC settlement
Corporate governance experts say 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 Musk, including his brother.
They aren’t sure if Denholm was hired just to placate the Securities and Exchange Commission to comply with the settlement or whether she’ll actually be able to corral the visionary but erratic Musk, who remains CEO.
“With all the crazy stuff going on, she was there,” said Rohan Williamson, a finance professor who studies corporate governance at Georgetown University’s McDonough School of Business. “She couldn’t control him before. Is anything going to change?”
Denholm, 55, is chief financial officer and strategy head at Telstra Corp. Ltd., Australia’s largest telecommunications company. Her new role at Tesla came largely because of the board’s failure to control 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 Musk misled investors.
Denholm will step down from Telstra after a six-month notice period. Then she’ll work full-time at Tesla, where she has served on the board since 2014. Under the SEC settlement, Musk can’t return as chairman for three years, and only with a shareholder vote.
The move vaults Denholm from relative obscurity into a high-profile position of trying to muzzle Musk and manage a company that is struggling to produce vehicles and make money.
https://wraltechwire.com/2018/10/25/elon-musk-delivers-tesla-reports-a-rare-quarterly-profit-its-biggest-to-date/
Charles Elson, director of the corporate governance center at the University of Delaware, said Tesla should have brought in someone from outside. No matter how talented 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 Musk misbehaved. “You really have got to wonder,” he said. “No other CEO of any other public company would have survived this.”
Making Denholm a full-time chair also creates governance problems because she could become a Tesla executive, blurring her role as an independent check on management, Elson said.
Email messages sent to Denholm Thursday were not immediately returned and Tesla declined comment beyond its statement announcing Denholm as chair.
Denholm brings financial experience and other positives to the table for Tesla, said Michael Cusumano, a professor at the Massachusetts Institute of Technology’s Sloan School of Management.
Before Telstra, she worked in Silicon Valley as chief financial officer at Juniper Networks and head of corporate strategic planning at Sun Microsystems. She also was national finance manager at Toyota Motor Corp.’s operations in Australia, and she’s a member of the board at Swiss robotics and industrial machinery maker ABB.
“She could bring some more financial discipline to Tesla,” which has $10 billion in debt and must keep manufacturing a large number of lower-priced Model 3 sedans to service its large debt and pay the bills, Cusumano said. Tesla cars also are having reliability problems, he said.
Cusumano further notes that 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,” said Cusumano, who has served on corporate boards. “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 Thursday morning, Musk wrote that he has great respect for Denholm. “Very much look forward to working together,” he wrote.
In a statement, Denholm said she believes in Tesla and looks forward to helping Musk and the company “achieve sustainable profitability and drive long-term shareholder value.”
