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Who wants to supervise Elon Musk?
The Securities and Exchange Commission has settled charges of fraud against
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leader in battle. The settlement calls, inter alia, for the installation of a new president to oversee Mr. Musk. The regulations will allow him to remain as the managing director.
This is clearly a great victory for shareholders in the short term, given the disproportionate role of Mr. Musk in the company. The title is expected to rebound on Monday and it is possible that the shares will receive further momentum as Tesla announces its third quarter deliveries later this week. If society takes governance restructuring seriously, Tesla also has the opportunity to create a stronger organization in the long run.
However, the new president will have a lot of work to do, including mastering the more problematic impulses of Mr. Musk, determining why executives continue to leave the company and helping to install strong replacements. The entire board will have to perform better and clearly show its independence from Mr. Musk. The first test could take place in the coming months as Tesla will probably have to consolidate its balance sheet by mobilizing new capital.
More importantly, Tesla must remedy the way Musk runs his company, which is at the root of the problems with the regulators. There are reasons to be skeptical, he can do it. Last Thursday, he called the fraud suit by the SEC "unjustified" in a statement.
"Integrity is the most important value of my life and the facts will show that I have never compromised it in any way," he said, before settling the charges. fraud less than two days later.
The poor judgment of Mr. Musk continued over the weekend by sending an e-mail to his employees to tell them that the company was "very close to profitability" in the third quarter. While he had said in the past that Tesla would make a profit during the quarter, it was not a good idea to send an email like when he got along with the SEC for increasing his stock with his tweet to go private.
Large companies set realistic business goals that they can actually achieve, do not disseminate material information through internal emails, and do not cause short sellers on social networks. A first step toward reclaiming investor confidence would be to publish realistic financial guidelines for 2019. The lack of this information at the end of 2018 is a curious omission for a company that plans to dominate the global auto sector in the long run.
The SEC's settlement closes an ugly chapter in Tesla's history. Monday should be a good day for the stock price, but the real work is just beginning.
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