Telstra's Denholm named in Tesla lawsuit over Musk's erratic behaviour

The chief financial officer of Australian telco giant Telstra has been named as a defendant in a US lawsuit over billionaire Elon Musk’s erratic behaviour and unusual Twitter activity.

Robyn Denholm, who in addition to her duties at Telstra also serves as a director of California-based electric car company Tesla, is being sued together with the rest of the automaker’s board for failing to properly control Mr Musk.

Elon Musk's antics took a bizarre turn when he smoked marijuana on a podcast.Credit: Bloomberg

A complaint lodged in Delaware's Chancery court last week claims the Tesla board breached its fiduciary duties by failing to set up controls and procedures to manage Mr Musk's communications, and to ensure his statements were accurate.

It alleges that Mr Musk’s tweets and the Tesla board’s failure to stop them “substantially damaged the company’s credibility, corporate image and goodwill”.

The complaint, which is being led by New York law firm Faruqi & Faruqi on behalf of shareholder Zachary Elton, also questions Ms Denholm’s independence as a director “because a majority of her income is derived from serving as a member of Tesla’s board”.

According to court documents, Ms Denholm was paid $US4.9 million ($7 million) for her duties as a Tesla director in 2017. That compares to total compensation of $2 million at Telstra last year.

Telstra's chief financial officer Robyn Denholm is on the Tesla board.Credit: Ben Rushton

“Despite being put on notice of E. Musk’s propensity for erratic public communications that have harmed the company and its stockholders, the board consciously disregarded his actions and failed to do anything,” the complaint alleges.

“The board put their loyalties to E. Musk ahead of their fiduciary duties to the company and its shareholders. Moreover, a majority of the board lacks independence from E. Musk due to extensive business and personal relationships.”

In August, Mr Musk claimed on Twitter that he had financing in place to take Tesla private, but the plan was ultimately abandoned. Last month, Mr Musk and Tesla agreed to pay America's powerful securities regulator $40 million in fines to settle fraud charges stemming from the buyout tweets.

Under the settlement deal, Mr Musk will relinquish the chairman role at Tesla for three years but remain CEO. James Murdoch, the former media executive and son of Rupert, who is a current Tesla director, has been named as a possible candidate for the vacant chairman's seat.

In recent months, Mr Musk has been hit with a defamation lawsuit following claims against a British diver involved in the rescue of Thai schoolboys trapped in a cave. He also publicly smoked marijuana on a podcast.

Tesla’s local representative didn’t respond to a request for comment on the lawsuit. Telstra and Ms Denholm declined to comment.

Corporate governance experts have questioned Ms Denholm's dual positions at Tesla and Telstra, but Telstra CEO Andy Penn has previously defended the arrangement. Ms Denholm joined Telstra in late 2016, and commenced duties as CFO earlier this month. She joined the Tesla board in 2014, its first female director.

Tesla has been hit by a wave of shareholder class action lawsuits since Mr Musk’s buyout plan was abandoned.

However, the action involving Ms Denholm, which was lodged last week, is beleived to be the first since the company settled claims with US regulators, and the first targeting the entire Tesla board.

It is a shareholder derivative suit, in which a shareholder can sue the board on behalf of the company.

Last week, Telstra chairman John Mullen criticised executive salaries, while at the same time defending pay for top executives at the telco.

Telstra suffered a first strike against its remuneration report with 62 per cent of shareholders voting against executive pay.