WASHINGTON/SAN FRANCISCO (Reuters) – Tesla Inc and Elon Musk have agreed to pay $20 million each to financial regulators and the billionaire will step down as the company’s chairman but remain as chief executive, under a settlement that caps a tumultuous two months for the carmaker.
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It was not immediately clear who would be appointed to the role. Antonio Gracias, the current lead independent director and CEO of Valor Equity Partners, has been criticized as being too close to Mr Musk and his companies.
“The question is whether Mr Musk’s buddies on the board decide to bring in a really strong chair who will stand up to Mr Musk,” said Erik Gordon, a University of Michigan business professor who follows corporate governance.
Mr Musk had been directly involved in almost every detail of Tesla’s product design and technology strategy, and drove the company’s employees to extraordinary achievements – much as another Silicon Valley chief executive, Steve Jobs, did at Apple Inc.
The entrepreneur is now required to step down as chairman of Tesla within 45 days, and he is not permitted to be re-elected to the post for three years.
The SEC charged Tesla with failing to have required disclosure controls and procedures for Mr Musk’s tweets. The SEC said the company had no way to determine if his tweets contained information that must be disclosed in corporate filings, or if they contained complete and accurate information.
Mr Musk walked away at the last minute from an earlier settlement with the SEC that would have required him to give up key leadership roles at the company for two years and pay a nominal fine, according to media reports on Friday. Reuters on Friday reported that Mr Musk could settle with the SEC but was ready for a court fight.
Investors said on Friday that it has been a mistake for Mr Musk to turn down that settlement, especially at a time when the company has been pushing hard to meet aggressive production targets for its Model 3 sedan.
The settlement tasks the Tesla board, which critics have accused of failing to rein in Mr Musk, with the tricky challenge of finding an independent chairman able to work closely with the sometimes unpredictable chief executive.
Mr Musk has driven the company to the verge of profitability with a costly ramp-up of production of its Model 3 over the past year. Electric vehicle news site Electrek reported that Tesla had produced 51,000 Model 3s with a couple of days left in the quarter, hitting its goal of 50,000 to 55,000.
The CEO, who has often turned to Twitter to promote Tesla and confront critics, said on Thursday that the SEC’s actions were unjustified. Tesla shares jumped after his Aug. 7 tweets, a blow to short-sellers betting on the stock’s decline.
The securities fraud agreement, disclosed by the US Securities and Exchange Commission on Saturday, will come as a relief to investors, who had worried that a lengthy legal fight would only further hurt the loss-making electric car company.
The SEC on Thursday charged Mr Musk, 47, with misleading investors with tweets on Aug. 7 that said he was considering taking Tesla private at $420 a share and had secured funding. The tweets had no basis in fact, and the ensuring market chaos hurt investors, it claimed.