Tesla's board has become a source of contention with the SEC and investors, with some viewing it as too close to Mr Musk.
This is what some institutional investors have always been calling for, contending that the board has failed to sufficiently govern the chief executive officer and that Musk may be stretched too thin, running Tesla as well as the rocket manufacturer SpaceX, where he's also both CEO and chairman.
As a reminder, as part of his settlement last month with the U.S. Securities and Exchange Commission over that now infamous take-private tweet, Elon agreed to give up his role as chairman of the electric carmaker he leads as chief executive.
He joined Tesla's board previous year as a non-executive director and has reportedly said he wants the job of chair. However, Gracias may not be sufficiently independent as he is invested in other companies linked with Musk, including SpaceX. She has yet to rule on the agreements with Musk and Tesla.
"The question when it comes to James Murdoch is, 'Is he the guy who'll be able to establish that level of authority with Elon Musk?'" asked Abby Adlerman, CEO of Boardspan, a corporate governance consulting company.
Murdoch now serves on the boards of Twenty-First Century Fox and News Corp. Tesla has to pay a separate $20 million fine, which the SEC said will be returned to investors.
Tesla shares fell 1.1 percent to $254.15 in midday trading.
On Tuesday, Murdoch resigned from the board of Sky plc, the owner of Sky News, as part of Comcast's takeover of the company, beating 21st Century Fox in an intense bidding war. The SEC intends to distribute the penalties to affected investors, it said.
Under terms of the SEC settlement, Musk is not permitted to be re-elected to the chairman's post for three years. That risked jeopardizing the hard-fought deal, which also requires Tesla to add two new independent directors.