While outspoken inventor Elon Musk will remain the CEO of Tesla, his recent Twitter outbursts have landed him in hot water with US regulators, and he stepped aside from the company’s board as part of a settlement.
After he tweeted details of his intentions to take Tesla private, he named a price at which he said it was worth, and its shares shot up as a result. An investigation revealed that the figure he named did not have any real basis, and the Securities and Investments Commission (SEC) felt that they had to act as a result.
This led to Musk’s removal from his position as Tesla’s Chair of the Board of Directors, and Robyn Denholm will be his replacement.
Denholm already has ties with Tesla, given that she sits on its board. She currently works for Telstra, an Australian communications company, and will join Tesla officially after she serves a six-month notice period.
Given her current role as Telstra’s CFO, it is likely that her strong financial acumen will be part of her strategy when leading Tesla’s board, putting an end to jittery share movement and some contentious financial statements from Musk.
Tesla confirmed that Musk will remain involved with the board in the interim to ‘be a resource to Robyn and provide any support that she requests in her role as Chair.’
Musk agreed to pay a $20m settlement as well as step down from the Chair position as he retains his position as CEO.
In addition, the tech company will bring two new independent directors to the board to make it clear to the SEC that it is looking to clear out any of the previous controversial culture.
Tesla will also have to set up a committee that will oversee and control Musk’s external communications to make sure that he does not disregard similar rules again. The fact that the SEC brought litigation against the company showed how seriously that it took the idea that someone could influence the share price of a company so readily on social media through what it considered to be an unfair mechanism.
The regulators also agreed that Musk cannot serve as Chair for the next three years, although he can stay on Tesla’s Board of Directors.
Musk’s habit of inappropriate tweeting was not the only reason that the board was happy to acquiesce to the request, given its current financial struggles. In the past, Musk has asked for suppliers to pay invoices early and put in some of his own funds to deliver Tesla’s products on time.
Due to Denholm’s pedigree in corporate finance, delivering efficient balance sheets will be of high priority. Tesla has not yet delivered consistent results, dipping in and out of large profits and going back into the red. For analysts to believe that it is a serious contender among corporate giants, it will have to learn to turn out the kinds of figures that investors and traders can rely on.
Denholm said in a statement that she is eager to be ‘helping Elon and the Tesla team achieve sustainable profitability and drive long-term shareholder value.’