Please ensure Javascript is enabled for purposes of website accessibility

US Consumer Spending Falls as Trump Tariff’s Muddle Economy

15 hours ago

US Supreme Court Lets Parents Take Kids Out of Classes With LGBT Storybooks

17 hours ago

In Win for Trump, US Supreme Court Limits Judges’ Power to Block Birthright Citizenship Order

18 hours ago

California’s Newsom Sues Fox News for $787 Million for Defamation Over Trump Call

18 hours ago

Motorcycle Collides With Tractor in Fatal Fresno County Collision

18 hours ago

Fourth of July Celebrations Begin Saturday. Here’s Your Fresno Area Guide

20 hours ago

Bill Moyers, Broadcaster and LBJ’s White House Press Secretary, Dies at 91

2 days ago

State Department Approves $30 Million for Gaza Humanitarian Foundation

2 days ago

Cargo Ship That Caught Fire Carrying Electric Vehicles Sinks in the Pacific

2 days ago

4 Million Acres of California Forests Could Lose Protection. What Trump’s ‘Roadless Rule’ Repeal Could Do

2 days ago
New Tesla Chair Must Rein in CEO Musk at Key Moment
gvw_ap_news
By Associated Press
Published 7 years ago on
October 1, 2018

Share

WASHINGTON — It won’t be an easy job.
Whoever becomes the new chairman of Tesla Motors will face the formidable task of reining in Elon Musk, the charismatic, visionary chief executive with an impulsive streak, while also helping Musk achieve his dream of turning Tesla into a profitable, mass-market producer of environmentally-friendly electric cars.
Musk is giving up the chairman’s role under a settlement announced Saturday with the Securities and Exchange Commission. Besides a new chairman, Tesla was also ordered to appoint two new, independent members to its board. A more assertive board could provide the kind of tighter oversight that many legal experts, and Tesla investors, say is overdue for a company of Tesla’s market value.
The settlement stemmed from a lawsuit the SEC filed charging Musk with misleading investors in August with a tweet that said he had “funding secured” for taking the company private:


Yet a more forceful board, coupled with a domineering CEO like Musk, could create conflicts at a risky time for the company. Visionary CEOs such as Apple’s Steve Jobs and Twitter’s Jack Dorsey have been forced out by strong boards of directors, though both eventually returned to their companies.
Even with the settlement, Tesla faces a daunting array of challenges.

The Justice Department Has Its Own Investigation Into Tweet

The Justice Department has opened its own investigation into Musk’s Aug. 7 tweet, in which he said he would take the company private at $420 a share. The SEC’s lawsuit charged that the tweet, which caused Tesla’s shares to jump, was misleading because he did not actually have the funding lined up for such a move.

About $1.3 billion in Tesla debt is due to be repaid by March, including $230 million in November.
Tesla is also under heavy pressure to turn a profit because it is burning through $1 billion in cash every three months and, as of the end of June, had just $2.2 billion in the bank.
Musk has said the company needs to produce 7,000 cars a week to make money, a target he aimed to reach in the July-September quarter. The company is likely to report production numbers this week and financial results from that quarter in early November.
Another concern: About $1.3 billion in Tesla debt is due to be repaid by March, including $230 million in November.
Some investors might want more than a new chairman. Tesla has no chief operating officer, a critical No. 2 executive in most companies. That’s a stark contrast to other startups, such as Facebook, where Mark Zuckerberg hired Sheryl Sandberg as a highly influential COO.
In the lawsuit filed Thursday by the SEC, the agency said it was seeking to remove Musk from Tesla management altogether. Many investors have argued that keeping Musk as CEO is critical at such a time.

Publicly Expressing Support for Many Recent Moves

“I do not doubt the value of Musk to Tesla,” John Coffee, a Columbia University law professor and corporate governance expert, said. “Without him, they are just a struggling start up that is burning cash at a hopeless rate and is facing a debt refunding crisis in the near future.

“I do not doubt the value of Musk to Tesla. Without him, they are just a struggling start up that is burning cash at a hopeless rate and is facing a debt refunding crisis in the near future.” John Coffee, a Columbia University law professor and corporate governance expert
“Musk is an iconic entrepreneur but he needs adult supervision,” Coffee added.
That’s where the new board members come in. The current board, which includes Musk’s brother, Kimbal Musk, is widely seen as subservient to Musk. They have publicly expressed support for many recent moves, such as his rejection last week of an early SEC settlement offer.
“The board is truly the alpha chapter of the Elon Musk fan club,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business.
Teresa Goody, a former SEC attorney and founder of The Goody Group, a consulting firm, said that many startups begin with a powerful CEO who typically puts “friendlies” on the board.
As a company grows and becomes more sophisticated, Goody said, more independent directors are typically brought on board to provide better oversight.
“That’s happening a little later in the life cycle of the company in the case of Tesla,” she said.

Elon Musk Is Different Than Many CEOs

Still, Elon Musk is different than many CEOs because he owns roughly 20 percent of the company’s stock. That gives him more influence.

“This humiliation — that Elon can’t go outside unless he’s on a leash — that will bother him the most.” Erik Gordon, a professor at the University of Michigan’s Ross School of Business
“In a typical case, the CEO is a high-priced employee” of the board, Gordon said. “Musk will still be more powerful than the board chair.”
There will be other constraints on Musk’s behavior: As part of the SEC settlement, his tweets and other comments will have to be vetted by the company before they can be released to the public.
“This humiliation — that Elon can’t go outside unless he’s on a leash — that will bother him the most,” Gordon said. He called it an “extraordinary measure.”
Gordon thinks the SEC should have gone further and sought to add as many as four new board members and remove some old ones.
Still, Gordon said, “I think this experience has shown him that however smart he is, or however powerful he thinks he is, the government is also powerful too.”
Musk may want to keep a close eye on the new chairman, however. Musk himself was the chair of the board, after investing in the company, before firing the chief executive and taking over as CEO.

DON'T MISS

What Are Fresno Real Estate Experts Predicting for 2025 and Beyond?

DON'T MISS

First California EV Mandates Hit Automakers This Year. Most Are Not Even Close

DON'T MISS

Trump Sends in DOGE to Slash Federal Gun Regulations by July 4

DON'T MISS

Tensions Flare at Announcement of Major Fresno County Gang Takedown

DON'T MISS

Measure C ‘Blackmailed’ As Fresno Enviro Coalition Gets Huge Say on Transportation Tax

DON'T MISS

Despite $49M Deficit, Fresno Unified Gives Top Brass 5% Raise, 3% One-Time Bonus

DON'T MISS

US Consumer Spending Falls as Trump Tariff’s Muddle Economy

DON'T MISS

US Supreme Court Preserves Key Element of Obamacare

DON'T MISS

US Supreme Court Lets Parents Take Kids Out of Classes With LGBT Storybooks

DON'T MISS

Fresno Unified Trustees Will Get Automatic Raises on Tuesday

DON'T MISS

Alleged ‘Fake’ ICE Agents Charged. Fresno Court Date Set

DON'T MISS

In Win for Trump, US Supreme Court Limits Judges’ Power to Block Birthright Citizenship Order

UP NEXT

Bill Moyers, Broadcaster and LBJ’s White House Press Secretary, Dies at 91

UP NEXT

Tesla Executive, Elon Musk Confidant Leaves EV Maker, Bloomberg News Reports

UP NEXT

How a Birthday Boat Ride on Lake Tahoe Turned Tragic

UP NEXT

Cuomo Concedes to Mamdani in New York City Democratic Mayoral Contest

UP NEXT

Mamdani Holds Lead Over Cuomo in Democratic Primary for NYC Mayor

UP NEXT

Clovis Man Sentenced to 8 Years in Federal Prison in Deadly Fentanyl Case

UP NEXT

Victims Identified as Death Toll Climbs to 8 in Lake Tahoe Boating Tragedy

UP NEXT

Florida to Build ‘Alligator Alcatraz’ Detention Center for Migrants in Everglades

UP NEXT

Americans Worry Conflict With Iran Could Escalate, Reuters/Ipsos Poll Finds

UP NEXT

Advisory Warns of ‘Heightened Threat Environment’ in US After Iran Strikes

Despite $49M Deficit, Fresno Unified Gives Top Brass 5% Raise, 3% One-Time Bonus

13 hours ago

US Consumer Spending Falls as Trump Tariff’s Muddle Economy

15 hours ago

US Supreme Court Preserves Key Element of Obamacare

16 hours ago

US Supreme Court Lets Parents Take Kids Out of Classes With LGBT Storybooks

17 hours ago

Fresno Unified Trustees Will Get Automatic Raises on Tuesday

17 hours ago

Alleged ‘Fake’ ICE Agents Charged. Fresno Court Date Set

18 hours ago

In Win for Trump, US Supreme Court Limits Judges’ Power to Block Birthright Citizenship Order

18 hours ago

California’s Newsom Sues Fox News for $787 Million for Defamation Over Trump Call

18 hours ago

Motorcycle Collides With Tractor in Fatal Fresno County Collision

18 hours ago

Ringo Is Ready to Rock Your World With ‘Pawsitive’ Vibes!

18 hours ago

Trump Sends in DOGE to Slash Federal Gun Regulations by July 4

WASHINGTON — The U.S. Department of Government Efficiency has sent staff to the agency that enforces federal gun laws with the goal of revis...

12 hours ago

American Flag Revolver
12 hours ago

Trump Sends in DOGE to Slash Federal Gun Regulations by July 4

Rob_Bonta_Speaking_At_Press_Conference_1280x720
12 hours ago

Tensions Flare at Announcement of Major Fresno County Gang Takedown

Garry_Bredefeld_Sandra_Celedon_Mesure_C_1280x720
13 hours ago

Measure C ‘Blackmailed’ As Fresno Enviro Coalition Gets Huge Say on Transportation Tax

Fresno_Unified_Raises_1280x720
13 hours ago

Despite $49M Deficit, Fresno Unified Gives Top Brass 5% Raise, 3% One-Time Bonus

Eastern Market in Washington, D.C.
15 hours ago

US Consumer Spending Falls as Trump Tariff’s Muddle Economy

Obamacare Sign in San Ysidro, California
16 hours ago

US Supreme Court Preserves Key Element of Obamacare

Pride Flags Fly in New York
17 hours ago

US Supreme Court Lets Parents Take Kids Out of Classes With LGBT Storybooks

17 hours ago

Fresno Unified Trustees Will Get Automatic Raises on Tuesday

Help continue the work that gets you the news that matters most.

Search

Send this to a friend