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Tesla board member Larry Ellison should whip Elon Musk into shape

It’s time for Oracle CEO, billionaire, major Tesla shareholder and board member Larry Ellison to step up and whip Elon Musk into CEO shape.

After all, isn’t that why Tesla brought the 74-year-old Ellison — who reportedly holds a $1 billion stake in the electric car company — onto the board, to help mold Musk into a more polished executive? Think back to when Eric Schmidt was brought on to lead a wild Google being spearheaded by co-founders Sergey Brin and Larry Page.

And isn’t that why the market sent Tesla shares 5.6% higher when Ellison’s appointment to the board was announced on Dec. 28?

FILE - In this Sept. 17, 2018, file photo SpaceX founder and chief executive Elon Musk speaks in Hawthorne, Calif. Musk is asking a California judge to throw out a lawsuit filed against him by a British diver who accused the tech entrepreneur of falsely calling him a pedophile. A court filing Wednesday, Dec. 26, 2018, argues that "the public knew from the outset that Musk's insults were not intended to be statements of fact." (AP Photo/Chris Carlson, File)
Teslo CEO Elon Musk (AP Photo/Chris Carlson, File)

The market was buying into the notion that Ellison brought credibility to the historically awful, pro-Musk Tesla board. Sure, Ellison was admitted friends with Musk, but with $1 billion invested in the company and new fiduciary duties as a Tesla board member those would supposedly take precedence.

Or so went the logic.

SEC claims Musk in contempt

On Monday afternoon, the U.S. Securities & Exchange Commission filed court documents asserting that Musk was in contempt of a 2018 settlement agreement that originated from Musk’s now legendary “go private” tweet in the summer of 2018. The SEC is questioning recent tweets from Musk saying Tesla would produce 500,000 cars this year.

“Tesla made 0 cars in 2011, but will make around 500k in 2019,” Musk tweeted on Feb. 19.

Musk corrected the tweets, but they reportedly were not pre-approved by Tesla as required by the settlement agreement (which also banned Musk from being Tesla chairman for three years).

Larry Ellison, co-founder and executive chairman of Oracle Corp., speaks during the Oracle OpenWorld 2018 conference in San Francisco, California, U.S., on Monday, Oct. 22, 2018. Ellison announced a series of updates injecting more automation and intelligence into Oracle's cloud applications. Photographer: David Paul Morris/Bloomberg via Getty Images
Larry Ellison, co-founder and executive chairman of Oracle Corp., speaks during the Oracle OpenWorld 2018 conference in San Francisco, California, U.S., on Monday, Oct. 22, 2018. Photographer: David Paul Morris/Bloomberg via Getty Images

Tesla’s defense appears to claim that Musk’s tweets were thought to be reiterations of previous public communication. It’s unclear from Tesla’s fourth quarter earnings call transcript if that assertion is correct.

A Tesla spokesman didn’t immediately return a request for comment on this matter.

Tesla shares fell 3% in pre-market trading on Tuesday on fears Musk would be forced to step aside as CEO for some time, or in entirety.

“We view this escalation as a negative and expect Tesla shares to come under pressure at least until some clarity is achieved,” said Citigroup analyst Itay Michaeli. “Though it’s difficult at this stage to predict an outcome (which can plausibly range from nothing material/additional fines to, at the extreme, a CEO removal), this escalation comes at a more delicate time for the company after recent management departures (including CFO), the ongoing Model 3 international expansion and looming debt maturities.”

Shareholders should be concerned

Unfortunately, so far, the billionaire board marriage between Ellison and Musk looks like a failure that should worry Tesla shareholders. Musk could build all the snazzy new electric cars he wants to wow the fan boys and fan girls, but if the innards of the company aren’t functioning correctly (that includes the board) that places shareholders at undue risk.

Not helping the perception of those innards: a recent Yahoo Finance investigation found at least 88 Tesla executives have left the company since January 2018.

It’s time for Ellison to protect his investment, and that starts with beginning a CEO mentoring program for Musk.

Brian Sozzi is an editor-at-large at Yahoo Finance. Follow him on Twitter @BrianSozzi

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