Musk’s policing puts the SEC in a difficult position. Any financial sanctions he is able to impose are likely to have little effect on someone as wealthy as Musk. And, given his importance to Tesla, further sanctions could potentially hurt shareholders, employees and others who have little or no say in who or how Musk chooses to choose. comply with securities laws.
One possible response from the SEC is to increase the size of the financial sanctions it imposes. But that may require a change in securities laws, and even then, in light of Musk’s net worth, no reasonable penalty based on his conduct to date is likely to be significant enough for the deter.
That said, one of the most effective answers lies with Tesla himself. Musk’s failings must be a headache for Tesla’s independent directors. His actions potentially call into question the integrity of Tesla’s management, including its board of directors. As fiduciaries, independent directors must urge the CEO to comply with all applicable laws and remove him if he is unable to do so. Failure to address this issue raises a fundamental concern about the board’s ability to manage Tesla, and if the board also fails to clearly outline this risk in the company’s public disclosures, Tesla and the board should be held directly accountable.
More than financial or other penalties, the real remedy lies with Tesla’s directors, who should focus on what’s best for the company and its shareholders. Given the value Musk brings to Tesla, calling the CEO to task for failing to comply with federal securities laws should be high on the list.