A few days after the Securities and Exchange Commission sued the CEO and chairman of Tesla Inc., Elon Musk; the decision was made. Musk has to step down as chairman of the company and pay a $20-million penalty. The company will have to play another $20-million penalty, all of the charges starting with the scandalous claims Musk made on Twitter about taking the company private.
Musk believes that the fraud charges are “unjustified.”
Nonetheless, he has settled. He will have to give up his position as chairman, but he will remain the CEO of the company. He will not be able to be re-elected as chairman for the next three years. Musk has 45 days to resign from the chairman position.
Tesla and Musk didn’t admit to any wrongdoing under the settlement which was done two days after SEC sued the CEO over his Twitter claims that he had enough funds and investors to support privatization of Tesla at $420 a share.
Two New Directors and a Committee of Independent Board Members
The co-director of the SEC’s Enforcement Division, Steven Peikin stated:
“As a result of the settlement, Elon Musk will no longer be chairman of Tesla, Tesla’s board will adopt important reforms – including an obligation to oversee Musk’s communications with investors – and both will pay financial penalties. The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders.”
This settlement will require Tesla to have two new independent directors and a committee of independent board members. An analyst at Robert W. Baird & Co., Ben Kallo, concluded that this is “a good resolution for Tesla stakeholders” and that the stock will trade “materially higher on this and into the quarter where we can focus on the fundamentals.”
According to Bloomberg, Musk sent an e-mailed statement saying:
“This unjustified action by the SEC leaves me deeply saddened and disappointed. I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way.”
Andre Blair s is the lead editor for Advocator.ca. He holds a B.A. in Psychology from the University of Toronto, and a Master of Science in Public Health (M.S.P.H.) from the School of Public Health, Department of Health Administration, at the University of North Carolina at Chapel Hill. Andre specializes in environmental health, but writes on a variety of issues.