Securities and Exchange Commission was surprised after Tesla's board and its chairman Elon Musk has pulled out at their carefully crafted deal.
According to The New York Times, SEC responds with an accusation against Musk but not at Tesla, which known as the company he co-founded. Musk was accused of securities fraud and following this, the company's board immediately defied the regulators. They reportedly issued a provocative statement saying their full confidence is in Musk, his integrity and even in his leadership to the company.
What happened was a stunning reverse; the board reportedly rejected an extraordinary and generous settlement. The said deal will allow Elon Musk to remain as chief executive but requires him to step down as the chairman for two years. At the moment, Tesla might lose Musk as chairman or even chief executive if the regulators prevail in court.
"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," says Jeffrey Sonnenfeld, a professor at the Yale School of Management.
Elon Musk has been obstinance for over 48 hours and this came at a significant price to him and the company. Last Thursday, they passed on a generous offer and SEC was compelled to extract a greater concession. From two years, the ban on Musk as chairman became three years. Aside from this, the fine was doubled from $20 million as Tesla pays $20 million fine as well. To no one's surprise, the 47-year-old CEO has also agreed to buy the same amount in Tesla's stock personally.
In addition, SEC requires the company as well to have two additional independent directors and elect one of them as the chairman. The view of Musk revealed this has been the most crucial issue since the settlement started. He neither denied the guilt o admitted In the agreement and unfortunately, he is unable to contest the allegations of SEC.
The stock of Tesla is in rebound this week and the relief of investors can be mirrored now that Musk will remain the chief executive. The company, on the other hand, will continue putting the mechanism in place to keep his increasingly impulsive behavior on track. NY Times revealed the board is set to closely monitor the communication Elon Musk with the investors. Lastly, the will establish a mainstay committee responsible for these monitoring disclosures.
