Tesla’s CEO Elon Musk is stepping down as chairman of the electric car manufacturer and is due to pay a $20 million fine under a settlement deal reached with the U.S Securities and Exchange commission. Elon Musk will remain CEO and still holds a seat on the board, however no longer as chairman.
Musk has agreed to resign from his role as chairman of the Tesla board within 45 days of the agreement, which was filed on Saturday. It has also been reported that he has agreed not to seek reelection or accept an appointment as chairman for three years. As per the settlement agreement, an independent chairman will be appointed.
Tesla must pay a seperate $20 million penalty, according to the SEC. The SEC said the charge and fine against Tesla is for failing to require disclosure controls and procedures relating to Elon Musk’s tweets.
As a part of the agreement, it has not been made necessary for Elon Musk to admit or deny the SEC’s allegations.
Tesla agreed to appoint two independent directors to its board and put in place additional controls and procedures to oversee Musk’s communications, according to the SEC. This likely menas that Elon Musk’s Twitter account will be restricted and controlled – at least when it comes to any communication regarding Tesla.
The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders
Steven Peikin, co-director of the SEC’s Enforcement Division said in a statement.
As TechCrunch reported, this agreement clearly does mark the beginning of a new era of corporate governance for Tesla. Some have argued that it was previously too tightly controlled by Musk and others closely aligned to him, such as his brother.
In 2017, Tesla diversified its board and added James Rupert Murdoch, the CEO of Twenty-First Century Fox Inc., and Linda Johnson Rice,Chairman and CEO of Johnson Publishing Company.
In 2017, Tesla already diversified its board and added James Rupert Murdoch, the CEO of Twenty-Century Fox Inc.
The SEC filed a complaint on Thursday alleging that Musk was lying when he tweeted on August 7th that he had secured finding for a private takeover of the company at $420 per share. Federal securities regulators reportedly served Tesla itself with a subpoena just a week after the tweet. Such investigations can take years before any action is taken, but this doesn’t seem to be the case this time, as charges were filed just six weeks later. The SEC said in the complaint that he violated anti-fraud provisions of the federal securities laws. The commission asked the court to fine Musk and bar the billionaire entrepreneur from serving as an officer or director of a public company.
Musk describes the fraud charges as an “unjustified action” that left him “deeply saddened and disappointed.” Here is his entire statement:
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.
Tesla and its board have since issues a joint statement in support of Elon Musk.