Abu Dhabi, UAEFriday 26 April 2019

Tesla adds Ellison and HR exec to board to appease SEC

Two are added after regulator called for more oversight on Musk

Tesla is naming Larry Ellison (pictured) and an executive from Walgreens to its board as part of a settlement with US regulators who demanded more oversight of chief executive Elon Musk. AP
Tesla is naming Larry Ellison (pictured) and an executive from Walgreens to its board as part of a settlement with US regulators who demanded more oversight of chief executive Elon Musk. AP

Tesla added Larry Ellison and Kathleen Wilson-Thompson to its board, picking a controversial Silicon Valley luminary and a respected human-resources expert to show securities regulators that it is giving Elon Musk more oversight.

Mr Ellison, the co-founder of Oracle, and Ms Wilson-Thompson, the global chief human resources officer of Walgreens Boots Alliance Inc., join a board the Securities and Exchange Commission ordered to step up its oversight after Mr Musk claimed in August to have had the funding and investor support for a buyout. The chief executive officer relinquished the role of chairman in November, and both he and the company agreed to pay $20 million (Dh73.4m) penalties.

In Mr Ellison, Mr Musk has added another larger-than-life technology titan lauded for his business accomplishments but not without his own corporate-governance controversies. The 74-year-old billionaire came under attack from Oracle shareholders for excessive pay packages while running the company. Mr Ellison also publicly defended Mr Musk after his tweets about taking Tesla private landed him in hot water with the SEC, a point that raised eyebrows with corporate-governance experts.

“His vocal support for Mr Musk doesn’t suggest the kind of objectivity coming in that I think people had hoped for,” said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “The SEC’s point was to to bring in two people who were neither supporters nor vocal opponents of Tesla.”

Wall Street analysts and investors cheered the news, with Tesla shares rising as much as 3.5 per cent to $327.18 Friday in New York. The stock was up 1.5 per cent this year through the close Thursday.

Wedbush Securities’ Daniel Ives called the choice of Mr Ellison “a home run” and said he could “help channel Mr Musk’s energy and passion into positives” and steer him away from the cloud created by his “going private tweetstorm,” according to research note published Friday.

Tesla also said it is setting up a committee on the board to oversee compliance with the SEC agreement regarding public disclosures and public statements and review potential conflicts of interest, employment and compensation disputes, according to a regulatory filing Friday.

The new additions to the board put a bookend on a months-long distraction that at one point looked like it might cost Mr Musk his future with the company. While reining him in may prove challenging, they’ll help steer a carmaker that’s made significant strides in profitably making and delivering electric vehicles.

Mr Ellison went off-script during an Oracle meeting with analysts in October to announce that he had been building a personal stake in Tesla and that it was his second-largest holding. He criticized how the media had covered Mr Musk, 47, whom he called a close friend.

“This guy is landing rockets,” Mr Ellison said in October of Mr Musk, who also runs Space Exploration Technologies. “You know, 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 rockets? You ever land a rocket on a robot drone? Who are you?”

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Tesla said in its statement announcing Mr Ellison would be joining the board that he had purchased 3 million shares of the electric-car maker earlier this year.

That’s not Mr Ellison’s only financial tie to Tesla. Last year, a company he invested in bought a microgrid energy system from Tesla Energy for a greenhouse farming project on the Hawaiian island of Lanai for $1.9 million, according to a Tesla regulatory filing Friday. Mr Ellison, the world’s 10th richest man according to the Bloomberg Billionaires Index, bought the island for $300 million in 2012.

He still holds the title of chairman and chief technology officer at Oracle, where investors rejected the company’s executive compensation plan for a sixth straight year in 2017.

Tesla’s board now has 11 members, including three women. This fall, California became the first US state to mandate that publicly traded companies have women on their boards. Those with at least seven directors need to have at least three women by 2021.

The SEC moved to punish Tesla and Mr Musk because it alleged he committed fraud by tweeting that he had the “funding secured” to take the company private at $420 a share. The agency said this and other claims the CEO made on August 7 were false and misleading and affected Tesla’s stock.

Mr Musk and Tesla reached the settlement with the SEC on September 29. It gave the company 90 days to add directors and take other actions. Since then, the chief executive has publicly lampooned the agency and bristled at the notion that he’ll change his Twitter habits.

Tesla’s legal department also has been going through shakeups since Mr Musk’s run-in with the SEC.

The company tapped Dane Butswinkas, the Washington trial lawyer who represented Mr Musk in his legal battle with the agency, earlier this month to become general counsel. He’ll replace Todd Maron, who’s leaving Tesla in January after five years. Before he joined the company, he represented Mr Musk through two divorces.

In November, Phil Rothenberg, a vice president on Tesla’s legal staff, left to became general counsel at Sonder, a hospitality startup. Mr Rothenberg previously worked at the SEC.

Updated: December 30, 2018 03:00 PM

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