In a recent article, CNBC noted that Tesla CEO Elon Musk’s latest tweets — which may see him held in contempt of his SEC settlement — prove that the company’s board can’t or won’t control him.
Recently, the SEC requested that a federal judge hold Tesla CEO Elon Musk in contempt after the CEO tweeted: “Tesla made 0 cars in 2011, but will make around 500k in 2019.” A few hours later, Musk corrected himself: “Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k.”
In response to this, the SEC said in court documents filed on Monday: “He once again published inaccurate and material information about Tesla to his over 24 million Twitter followers, including members of the press, and made this inaccurate information available to anyone with internet access.” The SEC further said that both Musk and Tesla confirmed that his tweets had been pre-approved by the company.
Following this, CNBC posted an article titled “Elon Musk’s tweets show that Tesla’s board either can’t or won’t try to keep him in check.” In the article, CNBC notes that Tesla’s board has failed to keep the CEO under control, as they agreed to do following the company’s last run-in with the SEC. CNBC writes:
“His board has to act,” said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “They seem to be incapable of acting, which is very disappointing.”
The board’s independence and ability to restrain Musk have been frequently called into question. Several board members have close ties to Musk either through family or business. Board members include his brother Kimbal Musk, a restaurateur and Tesla investor, and Antonio Gracias, a long-time investor who also sits on the boards of Musk’s companies Solar City and SpaceX.
CNBC notes that under the company’s agreement with the SEC, Musk’s close friend and confidant Robyn Denholm was appointed to the position of chairman of Tesla’s board:
But it is unclear how much power she [Denholm] actually has over Musk, Kelley Blue Book editor Matt DeLorenzo said Tuesday on CNBC’s “Power Lunch.”
“There was this agreement to bring in Robyn Denholm as the chairman, and the real question here is: Is that window dressing? I mean the question is, “Who is sort of Elon’s boss and how is this issue going to be addressed?'” DeLorenzo said.
After the SEC’s filed its most recent complaint, Musk took to twitter again to criticize the agency, saying “Something is broken with SEC oversight.”
Even with the new additions, Musk seems to control the board, including who is appointed and removed, Elson said. Any attempt to rein him in results potentially in their replacement.
“And they value, I guess, being on the board more than acting as normal board members would in such a situation,” Elson said. “In most companies, they would be gone.”
CNBC notes that when asked in a previous interview about Tesla’s plans to monitor his tweets, Musk stated that the company may make mistakes in doing so:
In its complaint, the SEC cited an interview Musk gave with CBS’ “60 Minutes” in December when he said the company doesn’t need to review his tweets.
Asked how the company would know if he is planning to send a potentially stock-moving tweet without being able to read it, Musk told the news show, “Well, I guess we might make mistakes. Who knows?”
Read the full article from CNBC here.