Tesla Inc. CEO Elon Musk and his company’s settlement with the U.S. Securities and Exchange Commission to resolve accusations that Musk made misleading tweets regarding his plans to take Tesla private shows the need for company boards to enact stringent disclosure policies across all communications channels, according to legal experts.
Musk on Saturday agreed to pay a $20 million fine and step down as chairman to settle SEC allegations that he posted false and misleading statements on Twitter about taking Tesla private — a disclosure that prompted a spike in trading of the electric carmaker’s shares and later spurred litigation.
As part of the settlement, Tesla agreed to pay its own $20 million fine and make changes to its corporate governance and disclosure controls, including adding two independent directors to its board and appointing an “experienced” securities attorney to vet its senior officers’ social media communications. Neither Musk nor Tesla admitted guilt in agreeing to the settlement.
“You don’t make haphazard disclosures about taking over companies without going through channels,” said Howard Berkower, a corporate partner with McCarter & English LLP. He described Musk’s market-moving tweets as an example of “how not to deal with the media as a CEO 101.”