Musk Steps Down as Chairman After Accepting SEC Charges

Elon Musk has arrived at a settlement with the U.S. Securities and Exchange Commission (SEC) after he was slapped with fraud charges. (Image: Screenshot / Youtube)
Elon Musk has arrived at a settlement with the U.S. Securities and Exchange Commission (SEC) after he was slapped with fraud charges. (Image: Screenshot / Youtube)

Elon Musk has arrived at a settlement with the U.S. Securities and Exchange Commission (SEC) after he was slapped with fraud charges on account of tweets that falsely claimed he had secured funding to buyout Tesla stockholders at US$420 per share.

The settlement

SEC’s initial settlement offer was rejected by Musk and Tesla’s board after the entrepreneur demanded that the company fight against the regulator and publicly declare his integrity. Musk even threatened to resign if the board rejected his demands. Under pressure from their founder and the most important figure at the company, the board pulled out from the settlement.

“What it tells us is this board, as a strategic plan, must be using the Jim Jones-Jonestown suicide pact. They are drinking the Kool-Aid of the founder. It is completely as self-destructive as Musk is,” The New York Times quotes Jeffrey Sonnenfeld, a professor at the Yale School of Management.

However, as news of Tesla declining the settlement spread, shares of the company fell by as much as 14 percent on a single day. This made Musk have a change of heart and Tesla was back negotiating with the regulator.

The SEC finally offered a new deal — Musk and Tesla had to pay US$20 million each as settlement. Musk was also required to step down as the chairman of the company for a period of three years. He was allowed to continue as the CEO and remain on the company’s board. Tesla is also expected to add two independent directors, with one of them acting as the chairman. Musk is required to resign from the post of chairman within 45 days.

Elon_Musk2

Musk and Tesla had to pay US$20 million each, and Musk was required to step down as the chairman of the company for a period of three years. (Image: Screenshot / Youtube)

“Both sides have pulled back, taken a deep breath, and realized that in the interest of the company, its shareholders, they need to put this behind them. Shareholders with Tesla will be able to go to sleep tonight knowing the Musk will remain at the helm of the company. At the same time, there will be appropriate restraints in place,” former SEC enforcement lawyer Stephen Crimmins said in an interview with Bloomberg.

Other charges

Elon Musk is facing a host of other legal issues. Another set of Musk’s tweets that said employees of Tesla would lose their stock options if they chose to organize as a union was seen as violating U.S. labor laws. The National Labor Relations Board has filed a complaint in this regard. Tesla issued a statement to clarify the issue.

Jalopnik quotes a Tesla spokesperson as saying that Musk’s tweet was only “a recognition of the fact that unlike Tesla, we’re not aware of a single UAW-represented automaker that provides stock options or restricted stock units to their production employees, and UAW organizers have consistently dismissed the value of Tesla equity as part of our compensation package. We fundamentally believe it’s critical that all employees be owners of Tesla so that everyone is on the same team, with all sharing in the company’s success.”

Musk’s company is also embroiled in a legal investigation by California’s Occupational Safety and Health Administration (Cal-OSHA) after reports of repeated worker injuries at the company’s Fremont manufacturing plant came to the attention of the agency. Though initial reports do not suggest any wrongdoing by Tesla, the investigation against the company is still ongoing.

1024px-Tesla_Factory,_Fremont_(CA,_USA)_(8763129679)

Musk’s company is also embroiled in a legal investigation by California’s Occupational Safety and Health Administration (Cal-OSHA). (Image: Maurizio Pesce via wikimedia CC BY 2.0 )

Follow us on Twitter or subscribe to our weekly email

Will the Chinese Middle Class Rise Up Against the Chinese Communist Party?
United Airlines Teams Up With Palantir to 'Leverage Customer Data'
#article-ad-block-->