Elon Musk Agrees To Step Down As Tesla Chairman

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Elon Musk settles with SEC with $20m payout and steps down as Tesla chairman, but more importantly avoids management ban

Electric car maker Tesla and its chief executive Elon Musk will be relieved after they reached a compromise settlement with the US Securities and Exchange Commission (SEC).

The SEC had last week sued Tesla and sought the removal of Elon Musk from the firm, after it accused Musk of securities fraud, and alleged he made a series of “false and misleading” tweets about potentially taking Tesla private last month.

Musk is already facing two other lawsuits over his Twitter announcement in August that he was considering taking the company private. Those lawsuits accuse Musk of a fraudulent effort to attack short sellers (financial traders Musk has previously criticised).

Elon Musk

SEC settlement

But late last week the US financial regulator shocked investors when it alleged that Musk’s claims that he had secured funding to take the electric carmaker private were “false and misleading”, after he had tweeted that funding for the privatisation had been “secured”,

The SEC had also been seeking to ban Musk from acting as an officer or director of a publicly traded company.

But Tesla’s board had backed the controversial billionaire and said they were “fully confident” in Musk.

Musk, 47, is the public face of Tesla and the move by the SEC to bar Musk as an officer of any public company is a rare move against the CEO of such a well-known firm.

And now in a development sure to please investors, Tesla has reached a settlement with the SEC.

Under the terms of the settlement, Musk and Tesla will pay $20m (£15.3m) each. Musk is paying to settle the SEC fraud charges, and Tesla is also paying $20m to settle claims it failed to adequately police Musk’s tweet.

Tesla will also hire two independent directors to strengthen its corporate governance.

And Musk will step down as board chairman within 45 days, and cannot seek re-election for three years.

But crucially for him, Musk will not be banned as an officer of any public company, and he retains his position as chief executive officer.

Musk reportedly accepted the deal with the SEC “without admitting or denying the allegations of the complaint,” according to a court document.

Criminal probe

It is also reported that the settlement must still be approved by a court.

And it should be noted that the settlement does not end the Department of Justice probe (which itself can file criminal charges).

It has apparently opened a criminal inquiry over Musk’s tweets.

Some observers have stated that Musk got off lightly with no management ban, but Reuters reported that Tesla and Musk ended up accepting harsher penalties than the SEC originally proposed to settle the claims.

Reuters, citing a person familiar with the deal, said that the SEC had initially been ready to accept a fine of a few million dollars and Musk’s removal as chairman for two years, but raised its demands after Musk balked at that offer.

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Author: Tom Jowitt
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