Tesla to ring in era of closer Musk oversight

Mr Elon Musk's communications are required to be more closely scrutinised under the agreement Tesla reached in September to settle a lawsuit over his tweets about taking the company private.
Mr Elon Musk's communications are required to be more closely scrutinised under the agreement Tesla reached in September to settle a lawsuit over his tweets about taking the company private.PHOTO: BLOOMBERG

Deadline over for firm to add new directors, take measures to better check CEO's tweets

SAN FRANCISCO • Yesterday was the start of a new age for Tesla's board and chief executive officer Elon Musk's Twitter feed.

It was the deadline the Securities and Exchange Commission (SEC) set for the electric carmaker to add two new independent directors, plus take a series of steps to better check its volatile CEO's presence on social media.

Those measures include setting up a board committee and employing a securities lawyer to oversee governing senior executives' tweets and posts on other platforms that are material to the company.

Mr Musk's communications, in particular, are required to be more closely scrutinised under the agreement Tesla reached in September to settle a lawsuit over his tweets about taking the company private. The carmaker already complied with the SEC's order to name a new chairman by tapping existing director Robyn Denholm to take over from Mr Musk last month.

The SEC moved to punish Tesla and Mr Musk because it alleged he committed fraud by tweeting that he had the "funding secured" to take the company private at US$420 a share. The SEC said this and other claims the CEO made on Aug 7 were false and misleading and impacted Tesla's stock, which closed that day at US$379.57, just short of a record.

The shares sold off within days and plunged to US$264.77 by Sept 28, the day after the SEC sued Mr Musk and raised the prospect of banning him from being CEO. He and Tesla settled the following day.

During the 90 days that the SEC gave Tesla to implement procedures and controls to oversee Mr Musk's communications, he publicly lambasted the agency and bristled at the notion that he would change his Twitter habits or be reined in by the board.

In an interview with 60 Minutes aired this month, Mr Musk said he did not respect the agency and no one was reviewing his posts before he sent them. When asked how Tesla would know if his tweets would move the market if they were not being read beforehand, he replied: "Well, I guess we might make some mistakes. Who knows?"

Mr Musk also said it was "unrealistic" to think Ms Denholm would watch over him, noting he is Tesla's largest shareholder. "I can just call for a shareholder vote and get anything done that I want," he said.

In October, Mr Musk wrote that the tweets that cost him a US$20 million (S$27.3 million) penalty paid to the SEC were "worth it". He also sent cryptic posts about deleting his titles at Tesla and obliquely needled the agency in the process.

Tesla's new independent directors will join a board that has been long criticised for poor governance.

Last month, a union-affiliated investor group and officials representing major pension funds in four states sent a letter to board members noting five of the eight non-executive directors on the board had professional or personal ties to Mr Musk. The investors pushed for Tesla's board to go beyond the terms of the SEC's settlement by setting timelines for some directors to leave, among other measures.

For all the hubbub over Mr Musk's tweeting, a lawyer representing him in a defamation lawsuit brought by British cave explorer Vernon Unsworth, whom Mr Musk called a paedophile in July, is downplaying the situation.

In a motion to dismiss the lawsuit filed Thursday, Mr Musk's lawyer John Hueston said his client's insults were not intended to be statements of fact but were made in the middle of a "schoolyard spat on social media". The lawyer referred to Twitter as "a social networking website infamous for invective and hyperbole" and said it is "rife with sophomoric commentary".

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A version of this article appeared in the print edition of The Straits Times on December 29, 2018, with the headline 'Tesla to ring in era of closer Musk oversight'. Print Edition | Subscribe