Elon Musk will step down as Tesla chairman to settle fraud charges brought by the U.S. over claims he made saying he'd take his company private. As part of Musk's settlement, both Tesla and Musk will each pay a $20 million fine — and Musk can stay on as CEO, the Security and Exchange Commission (SEC) announced Saturday. What does that mean for Musk and Tesla? And what are the differences between these two roles anyway? We take a look at what sets the CEO and chairman roles apart. The role of CEO A CEO is a company's top decision-maker and serves as the public face of a company. This post is responsible for the company's overall performance and commitment to its internal and external stakeholders, former P&G CEO and current Snap board director Alan George Lafley writes in Harvard Business Review. The CEO, writes Lafley, decides which business the company is and isn't in, shapes its values and balances the investments the company makes in both the present and the future. A study tracking CEO time from two Harvard researchers found that chief executives spend 25 percent of their time speaking to others and building relationships, 25 percent on functional and business unit reviews, 16 percent on organization and culture, and 21 percent on strategy. A bulk of these work-tasks often take place during meetings. Dedicating himself solely to being Tesla's CEO may help Musk regain control of his company's daily operations and focus less on shareholder demands. Musk, a hands-on leader, has been known to put himself on the production line to help Tesla through its manufacturing sprints, unusual for a CEO. The role of chairman<doc-sep>“I thought about what are the problems that are most likely to affect the future of the world or future of humanity.” Elon Musk, a South African-born engineer, inventor and billionaire, is one of the most important entrepreneurs in the world. But the 47-year-old is no stranger to turmoil, and by his own account his career has been full of highs and lows. “Just three years ago, I was showering at the Y and sleeping on the office floor. And now, I have got a million-dollar car and quite a few creature comforts.” After making a fortune with his first successful startup, Zip2, Musk gained fame as the co-founder of PayPal in the late 1990s. “So this is an ATM. What we’re going to do is transform the traditional banking industry.” The company lost hundreds of millions of dollars, and Musk was ousted as CEO because of internal turmoil. But when PayPal went public in 2002, and then was sold to eBay, Musk — as the biggest shareholder — walked away with $200 million. By the mid-2000s, Musk had turned around and invested almost all of his PayPal fortune into his new companies: SpaceX, Tesla and SolarCity. With SpaceX, Musk’s aspiration is out of this world — literally. It’s a commercial space flight company, which designs and launches advanced rockets into space. “Behind me is where Falcon 9 would sit during launch.” One of its ambitions is to eventually send people to Mars. “And I can’t think of anything more exciting than going out there and being among the stars.” But it has faced some roadblocks. Their first three rocket launches — failed, burning through almost all of the company’s assets. But SpaceX has had recent successes. The Falcon Heavy launch earlier this year was a big milestone and it carried an interesting payload: a dummy astronaut riding a Tesla car that was orbiting space. The company has also landed contracts with NASA, but questions about safety and cost remain. “We sold over 1,000 cars — and by sold I mean people put down a substantial deposit on the car.” Tesla, Musk’s electric car company, is one of the first of its kind to work on a large scale. It has also successfully disrupted the auto industry. The company is valued at over $50 billion. The Tesla Model S has been called the greatest car ever built. But Tesla has also faced some setbacks, including car batteries that caught on fire, recalls and production delays. SolarCity, Musk’s renewable energy venture, initially had a bright future. It’s the largest provider of rooftop solar systems in the U.S., and the company boomed on Wall Street. But after investors raised doubts about its business model, SolarCity’s shares quickly lost value, and Tesla had to take over in what was widely seen as a bailout. “We really need to make solar panels as appealing as electric cars have become.” But while Musk may have been flirting with bankruptcy and calamity for years, his projects continue to captivate the collective imagination. “Life has to be more than about solving problems. There have to be things that make you proud to be a member of humanity.”<doc-sep>In the end, Elon Musk got off easy. Two days after the Securities and Exchange Commission filed a complaint against him and Tesla TSLA, +2.39% over several tweets promoting a non-existent deal that would take the electric-car maker private, Musk and the SEC came to a settlement. Under its terms, he will remain as CEO but step down as chairman of Tesla’s board for three years; Tesla will add two independent board members and muzzle the freewheeling Musk’s Twitter feed; and Musk and Tesla will each pay $20 million to investors who lost money. (News of the settlement sent Tesla’s stock soaring Monday.) “ In a culture obsessed with money and success, we have turned CEOs into celebrities, to the detriment of investors and themselves. ” This was yet another slap on the wrist from a regulator that lost its teeth years ago. (“SEC” should stand for “Settle Every Complaint.”) In its complaint, the SEC had threatened to ban Musk from serving as an officer or director of a publicly traded company for life. Indeed, Musk’s perennial war with short-sellers, his contemptuous exchanges with analysts, his openly smoking pot on a podcast, and his admissions to The New York Times that he often got little sleep for days on end shows he’s not cut out to run a public company, a very different animal than being a “visionary” or entrepreneur. But it also reveals how deep is the media’s and the public’s need to worship successful CEOs, particularly tech entrepreneurs, as if they were gods. It’s what we used to do with great athletes and movie stars. Now, in a culture obsessed with money and success, we have turned CEOs into celebrities, to the detriment of investors and themselves. ‘Lifestyles of the Rich and Famous’ The celebrity CEO phenomenon has been going on since the 1980s, when Malcolm Forbes, owner of Forbes magazine (where I worked briefly), urged the rich to celebrate their wealth rather than hide it. The late Robin Leach’s “Lifestyles of the Rich and Famous” extolled the gaudiest opulence, epitomized by an up-and-coming real estate developer named Donald Trump, who was one of the first celebrity businessmen. During that era, Lee Iacocca, who railed against imports from Japan the way Trump now does about China, gained fame by turning Chrysler around and becoming its most visible pitchman and a best-selling author. T. Boone Pickens and Carl Icahn became symbols of the “shareholder revolution,” although their legacy is more about how they enriched themselves. Mutual fund managers like Peter Lynch became superstars, too, the way hedge fund managers like Bill Ackman, Ray Dalio and David Einhorn are today. And, of course, Warren Buffett’s combination of an “aw, shucks” Midwest demeanor and steely focus on the numbers has given him the unique distinction of being a beloved multibillionaire. The rise of Apple AAPL, -0.04% and Microsoft MSFT, -0.09% elevated their co-founders Steve Jobs and Bill Gates to godlike status, though Gates was much less of a creative genius than Jobs. Jeff Bezos of Amazon AMZN, +0.19% , now the world’s richest man, also has ascended to that pantheon, though personally he is much lower key. The danger of celebrity CEOs Some celebrity CEOs have made tons of money for their investors, but they can have a big downside, too, as Rakesh Khurana noted in the Harvard Business Review as early as 2002. “The widespread quasi-religious belief in the powers of charismatic leaders is problematic,” he wrote. “Charismatic leaders can destabilize organizations in dangerous ways.” Take Jack Welch and Sandy Weill, who were treated with awe by a fawning financial media in their day. Their hand-picked successors were mediocrities who either destroyed their celebrity mentors’ creations or exposed the weak foundations they had laid. (On Monday, GE GE, +2.13% fired its latest CEO, John Flannery, after a year on the job and took a $23 billion impairment charge.) Special skills Which brings us back to Elon Musk. He’s no doubt a brilliant entrepreneur who built Tesla from nothing into a cutting-edge luxury-car maker, and has the private SpaceX on track for future flights to the moon and Mars. But those skills are not the ones needed to run a big public company, which Gates and Bezos mastered in different ways. A lot of this hero worship is, quite frankly, the financial media’s fault. Cover stories featuring celebrity CEOs used to fly off the newsstands, and now Musk and others like him generate millions of clicks. In a world where ad-supported media are struggling, we can’t ignore that. But you’re the ones reading these stories and buying these stocks and following them as if they’re your favorite team. Maybe instead of chasing high-flyers and investment fads like crypto and cannabis, you should buy solid companies run by capable but “boring” CEOs or low-cost index funds and ETFs. It’s time for all of us to “just say no” to celebrity CEOs. Howard R. Gold is a MarketWatch columnist and founder and editor of GoldenEgg Investing, which offers exclusive market commentary and simple, low-cost, low-risk retirement investing plans. Follow him on Twitter @howardrgold.<doc-sep>
Tesla CEO Elon Musk will step down as chairman of the electric automaker and pay a $20 million fine under a settlement reached with the U.S Securities and Exchange commission. Musk will remain CEO and he will still keep a seat on the board, just not as chairman. The agreement settles what could have turned into a bitter and potentially damaging fight for Musk, the company, and Tesla shareholders. Musk will resign from his role as chairman of the Tesla board within 45 days of the agreement, which was filed Saturday. He has agreed to not seek reelection or accept an appointment as chairman for three years. An independent chairman will be appointed, under the settlement agreement. Tesla will pay a separate $20 million penalty, according to the SEC. The SEC said the charge and fine against Tesla is for failing to require disclosure controls and procedures relating to Musk’s tweets. Musk doesn’t have to admit or deny the SEC’s allegations as part of the agreement. Tesla has also agreed to appoint two new independent directors to its board and establish a new committee of independent directors and put in place additional controls and procedures to oversee Musk’s communications, according to the SEC. This likely means that Musk, who frequently turns to Twitter to unveils new products, features and updates on his multiple companies, will be more restricted moving forward. At least when it comes to his tweets about Tesla. “The resolution is intended to prevent further market disruption and harm to Tesla’s shareholders,” Steven Peikin, co-director of the SEC’s Enforcement Division said in a statement. The agreement marks the beginning of a new era of corporate governance for Tesla, which some shareholders have argued is too tightly controlled by Musk and others closely aligned to him such as his brother Kimbal Musk. Investor and founding board member Steve Jurvetson is still on leave. In 2017, Tesla diversified its board and added James Rupert Murdoch, the CEO of Twenty-First Century Fox Inc., and Linda Johnson Rice,Chairman and CEO of Johnson Publishing Company. Other board members include: Robyn Denholm, who joined the board in 2014, Brad W. Buss, who has been on since 2009, Antonio Gracias, and Ira Ehrenpreis, one of longest-serving board members who joined in 2007. The SEC filed a complaint Thursday in federal district court alleged that Musk lied when he tweeted on August 7 that he had “funding secured” for a private takeover of the company at $420 per share. Federal securities regulators reportedly served Tesla with a subpoena just a week after the tweet. Investigations can take years before any action is taken, if at all. In this case, charges were filed just six weeks later. The SEC said in the complaint that Musk violated anti-fraud provisions of the federal securities laws. The commission has asked the court to fine Musk and bar the billionaire entrepreneur from serving as an officer or director of a public company. Musk described fraud charges an “unjustified action” that has left him “deeply saddened and disappointed.” Tesla and the board later issued a joint statement supporting Musk. The complaint contains a number of eye-browing raising details, including that he had talked to the board about an offer to take Tesla private as early as August 2 when he sent to Tesla’s board of directors, chief financial officer and general counsel an email with the subject, “Offer to Take Tesla Private at $420.”