Some Tesla Inc. (TSLA) directors want James Murdoch, a board member at the electric car maker and CEO of Twenty-First Century Fox Inc. (FOX), to replace Elon Musk as the company’s chair, people familiar with the matter told The New York Times.
The Securities and Exchange Commission (SEC) has given Tesla just 45 days to find a new chair. Sources close to the selection process said the board has not yet engaged in any “serious” talks about who Musk’s successor should be, adding that Murdoch, a name favored by some, has not discussed the position, nor volunteered to take it on.
Investors seemed to approve as the stock rose 1.32% in pre-market trading.
Several sources also told the newspaper that Musk single-handedly prevented Tesla from reaching an earlier, more satisfactory settlement with the SEC.
Musk Threatened to Resign
After determining that the tech entrepreneur was guilty of misleading investors when he tweeted that that he had secured funding to take Tesla private, federal regulators reached out to the electric car maker to discuss a suitable punishment. The SEC initially put forward a proposal that would have enabled Musk to stay on as CEO and step down as chair for two years.
According to The New York Times, Musk threatened to resign on the spot if the board agreed to those requests. He also reportedly demanded that Tesla’s directors publicly back him, prompting the company to issue a statement saying that it is “fully confident in Elon, his integrity, and his leadership of the company.” (See also: SEC Sues Tesla CEO Elon Musk: What Happens Next?)
Musk is believed to have experienced a change of heart after seeing Tesla’s stock plunge the following morning. The lack of support from investors eventually led to his "grudging approval" to reach a settlement with the SEC.
Musk’s Stubbornness Came at a Cost
The New York Times reported that Musk’s refusal to play ball for 48 hours came at a significant price for the company and its CEO. Musk was banned from serving as chair for three years, rather than the initial two-year offer, and saw his fine double to $20 million. Tesla was also hit with a $20 million fine as part of the settlement. (See also: Elon Musk Out as Board Chair of Tesla, Settles With SEC.)
The electric car maker now has little time to find a suitable new chair. Lucian Bebchuk, a professor at Harvard Law School and expert in corporate governance, told the newspaper that the company’s choice will probably have little bearing on how Tesla is run.
Bebchuk said that independent directors often have difficulty asserting themselves in companies where high profile figures such as Musk exist. “As courts and governance researchers have long recognized, the presence of a dominant shareholder is likely to reduce the effectiveness of independent directors as overseers of the CEO’s decisions and behavior.”