Dalvin Brown of USA Today had the news:
Musk has 45 days to resign from the chairmanship, and Tesla will appoint an independent chairman to replace him.
Tesla will add two new independent directors to the company’s board within 90 days and pay a separate $20 million penalty.
The agreement calls for Tesla to create a permanent committee that oversees the executive’s communications with investors, including those made through Twitter, according to the SEC.
This comes just two days after the SEC filed a complaint claiming that Musk made a “false and misleading” statement when he tweeted that the company had enough funding to go private.
“Am considering taking Tesla private at $420. Funding secured,” Musk tweeted last month.
Liana B. Baker and Michelle Price of Reuters reported that the SEC has been focusing recently on corporate executives:
In the last week, the SEC announced charges or penalties against eight corporate officials at six companies, including Tesla. The SEC pursued each on different grounds, but securities lawyers said they highlight a shift to an emphasis on personal wrongdoing that has accelerated under Jay Clayton, an appointee of U.S. President Donald Trump who has served as SEC chairman since May 2017.
“Clayton is focused on holding individuals liable and not just corporate entities,” said Mary Hansen, co-chair of the white collar defense and corporate investigations practice at Drinker Biddle, who worked in the SEC’s enforcement division for eight years.
“The public wants to see our law enforcement, whether it be civil or criminal, hold those individuals responsible. That’s what is driving this focus on individual liability.”
The SEC brought action last week against the former president and chief financial officer of LendingClub Asset Management, Renaud Laplanche and Carrie Dolan, and the former CEO and CFO of Walgreens Boots Alliance, Gregory Wasson and Wade Miquelon.
Jeremy C. Owens of MarketWatch.com reported that Tesla will need to find adult supervision for Musk:
The regulators hope a settlement announced Saturday between the SEC, Musk and Tesla achieves those goals by putting more independent adults in the room to oversee Musk while taking $20 million directly from the executive. The key question is if Musk will learn his lesson and take the advice of outsiders, or continue to act recklessly on Twitter and needlessly endanger Tesla investors.
The current Tesla board stood by as Musk’s Twitter habit devolved into attacking journalists, calling a cave diver who helped save trapped Thai children a “pedo” and eventually claiming he received funding for a deal to go private, which led to the market-moving tweets that caused the settlement. Musk will not be able to lead that board for three years under the deal — splitting the chairman and CEO roles, as most corporate governance experts recommend — and at least two new independent members must be named. The board currently consists of nine members.
teve Diamond, an associate professor of law at Santa Clara University School of Law who has advised the CtW (Change to Win) Investment Group in efforts to get more independent directors on Tesla’s board, said Saturday that the deal should have a positive effect on Tesla’s governance.
“It will have an impact on the culture of the board, which won’t just be a cabal of Musk cronies,” Diamond said in a phone interview. “He’ll be forced to respond to a broader array of questions and concerns, and it could strengthen the monitoring and oversight.”
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