Tesla had until next Tuesday to name an independent board chairman under the settlement with the U.S. Securities and Exchange Commission (SEC), which said Musk's tweets about taking the company private were fraudulent and that the billionaire could retain his role as CEO but should quit as chair for at least three years.
The electric auto and solar panel company's board on Thursday named Australian telecommunications executive Robyn Denholm as chairman, effective immediately.
Ms Denholm is now chief financial officer and head of strategy at Australian telecoms group Tesltra.
"To ensure a smooth transition during the remainder of Robyn's time at Telstra, Elon will be a resource to Robyn and provide any support that she requests in her role as chair".
Apart from appointing a new chairman, Tesla was required to appoint two new independent members to its board.
Tesla rose as much as 0.6 percent percent to $350.25 as of 8:30 a.m.in NY, before the start of regular trading.
Earlier this year, Mr Musk also sparked controversy after a first-quarter earnings conference call when he criticised Wall Street analysts for asking "bonehead" questions about the company's finances.
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An Australian, Denholm is Telstra's chief financial officer and head of strategy and already has served on Tesla's board as an independent director.
Denholm is now chief financial officer at Australian telecoms operator Telstra Corp Ltd and has been an independent director on Tesla's board since 2014. Musk was required to pay the commision 20 million dollars which Tesla also accepted a 20 million dollar fine.
Elson said the company should have brought in someone from outside to be chairman, and that no matter how talented Denholm may be, she has a shadow over her of being on the board that did little as Musk misbehaved.
"I look forward to working even more closely with Robyn as we continue accelerating the advent of sustainable energy", he added.
Email messages sent to Denholm Thursday were not immediately returned.
Denholm is no stranger to Silicon Valley: She's had senior roles at companies including Juniper Networks, where she was chief financial officer, and Sun Microsystems, as well as seven years at Toyota back home in Australia.
That alluded to shortsellers, investors who have bet that Tesla shares will fall and who are frequently the subject of Musk´s derision.