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)
Copyright (c) 2018 Dow Jones & Company, Inc.
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