By Isabelle Chaboud, Associate Professor of Financial Analysis, Audit and Risk Management, Grenoble School of Management (GEM). First published in The Conversation la France.

Robyn Denholm, 55, was officially named on November 7, 2018 to replace the iconic Elon Musk as chairman of the board of Tesla, the US electric vehicle manufacturer. Why this choice ? Is it announcing a desire to profoundly reform a governance questioned by certain investors? Can she tame the whimsical boss? And can she really play her role independently?

The appointment comes in the wake of the SEC's sanctions against Elon Musk after the famous tweet of August 7, 2018, in which the automaker's boss said he planned to withdraw Tesla from the $ 420 stock market with guaranteed financing. Elon Musk had been fined $ 20 million and resigned as chairman of Tesla's board of directors. A function that he has been prohibited from exercising for at least three years. While some investors and stakeholders may welcome the separation of power between the CEO and the new Chair of the Board, others may see a new blow of communication and ask questions about the real independence of Robyn Denholm.

Why Robyn Denholm?

On paper, Australian Robyn Denholm has several strengths. First, she has solid experience in both the technology and automotive sectors. After spending seven years with Toyota in a financial role, she worked in Silicon Valley for 16 years in operational and financial roles, first with Sun Microsystems and then with Juniper Networks. It has also undertaken a successful restructuring that has allowed the group to post record profits in 2015.

Robyn Denholm is currently the Financial and Strategic Director of the Australian telecom group Telstra, where she was also tasked with launching a restructuring. She plans to work full-time for her new role at Tesla and has resigned from her Australian position. After that, she was already an independent director of Tesla since 2014, so she already knows the group and in particular her CEO Elon Musk with whom she has managed to work. He said:

Robyn has proven experience in both the technology and automotive industries and has made a significant contribution as a board member over the past four years in helping us become profitable. I look forward to working with Robyn even more closely in the future. "

A woman capable of managing a leader with an oversized ego

James Murdoch had been approached, but with a strong personality, the risk of confrontation was probably too high. Tesla seems to have opted for a personality more withdrawn. In a Financial Times article titled "Low-key Robyn Denholm takes on the challenge of Elon Musk taming" that could be translated as "The discrete Robyn Denholm will face the challenge of taming Elon Musk," the analyst Pierre Ferragu, which covered Jupiter Netwoorks at the time Robyn Denholm was working there, reports that "she has proven herself in the management of individuals with an overdeveloped ego".

He points out that facing an alpha male, "Robyn Denholm behaves like the exact opposite: she can remain very calm, very serene. She has a less visible personality but she is very strong at leading changes without being in the light. " At SpaceX, Elon Musk is collaborating with another woman: Gwynne Shotwell who joined SpaceX in 2002 and whose operations she has been leading since 2008. Unlike collaborations with the executives who left the ship at SpaceX or Tesla (over Twenty executives have left Tesla since 2016), this tandem seems to work well.

A woman who takes risks

In any case, it is a woman who takes risks. As noted by Renee B. Adams (University of New South Wales) and Vanitha Ragunathan (University of Queensland) in their paper Lehman Sisters , we must not trust the stereotypes that make all women feel refractory to risks. According to their research, when a woman is chosen for a senior management position (especially in finance), it is often the case that she has similar characteristics to men in terms of risk appetite and different from men. the general population of women.

A point of view that advocates the choice of female directors because of their competence rather than wanting to establish quotas to respect a balanced representation of women and men. Researchers indicate in their paper that the appointment of women on boards of directors brings other benefits, without really being able to explain them. For example, the analysis of 300 large banks and financial institutions listed in the United States over a four-year period from the 2007-2008 financial crisis showed that banks that had women on their boards of directors were did not take less risk but did better.

$ 17 million in compensation

Can Robyn Denholm truly exercise her independent judgment when she is a director on all three Tesla committees and, in addition, she is the Chair of the Audit Committee? It should be noted that Robyn Denholm is a member of the Audit Committee, the Nomination and Compensation Committee, and the Corporate Governance Committee. She has been appointed to the position of Chair of the Audit Committee since August 11, 2014.

Finally, we think it is important to add that she has been paid a lot for her work since she has received more than $ 17 million in remuneration for her mandates over the past four years. This amount was calculated from Tesla's Proxy Statement Pursuant to Section 14 (a ) filed with the SEC prior to the Shareholders' Meeting for fiscal years 2014 to 2017. More interesting when one looks closely at the amounts provided by Tesla, it appears that only 1% of the remuneration was paid in directors' fees (less than $ 153,000) while 99% ($ 16.975 million) corresponds to stock options.

Although no US governance code provides for a limit or method of compensation, we can ask ourselves whether excessive compensation based primarily on stock options can not have an impact on corporate governance. Would it not tend to encourage risk taking since the directors have nothing to lose. A question raised in 2015 by Caroline Hayek, from Kennesaw State University, which for example states in its research that the excessive remuneration of the Enron audit committee and based on 74% of stock options would have played a major role in the fall of the US energy giant in 2001. The compensation of the directors would have been three times the average compensation paid to directors in the United States in 2001 and valued at $ 138,747 by the National Association of Corporate Directors' Blue Ribbon Commission.

Risk appetite, attraction to financial gain, personal challenge? Can she really tame Elon Musk? Some skeptics are already arguing that only an independent director from outside could have met the challenge because the current board has not been able to oppose Elon Musk so far. Witness the case of the threat of the withdrawal of the stock market in the summer of 2018. No doubt that markets and investors are waiting for a strong signal. If Robyn Denholm's intention is really to change the governance in depth, there will be significant changes to be made, such as the appointment of two other independent directors recommended by the SEC or the establishment of a procedure to oversee the communication of leaders, especially on Twitter.

Related:

Featured