CEO Musk Agrees to Step Down as Tesla’s Chairman

Tesla Inc. CEO Elon Musk settled a U.S. Securities and Exchange Commission lawsuit on Saturday by agreeing to give up the chairmanship position for three years.

The civil lawsuit, which had been filed last Thursday, sought a federal court order banning Musk from serving as a director or executive of any public company. The complaint charged that Musk misled shareholders on Aug. 7 with an impulsive nine-word tweet that incorrectly declared he had secured funding to privatize the electric carmaker at $420 per share.

Under terms of the settlement, Musk will retain his board seat and CEO position. But he and Tesla each must pay a fine of $20 million.

Tesla also is ordered to add two independent directors to its nine-member board, install an independent chairman and create a special committee to monitor Musk’s communications. The panel will be required to set up mandatory procedures and controls to oversee Musk’s communications “in any format” about the company.

The directive had no immediate effect on Musk’s enthusiastic management style, The New York Times points out. He fired off an email shortly after 1 a.m. Sunday extoling all Tesla employees to work “super hardcore” on Sunday in a bid to establish the company’s profitability. Doing so, the declared, would prove skeptics wrong and “achieve an epic victory beyond all expectations.”

Meanwhile, the U.S. Dept. of Justice is continuing a probe into possible criminal wrongdoing regarding the August tweet.

Tesla also faces significant financial hurdles. The company, which lost $743 million in April-June, drained its $2.6 billion cash reserve by $430 million during the period. The Times points out that Tesla also owes suppliers $3 billion and faces payments on bonds of $230 million in November and $920 million next March.