Tesla Shareholders, Not the Government, Should Hold the CEO Leash

Depending on whom you talk to, Tesla CEO Elon Musk is either the next Henry Ford or the next P.T. Barnum. Musk’s explosive tweets reverberate in financial markets almost as much as those of our tweeter in chief, @realdonaldtrump.

So what should the government do to help shield Tesla investors from the share-price volatility his tweets may cause? Absolutely nothing, unless his tweets are found to be fraudulent and deceptive, not merely outrageous.

Musk’s emotional tweets — such as the recent one calling the Securities and Exchange Commission (SEC) the “Shortseller Enrichment Commission” — may at times hurt Tesla shareholders by causing share-price volatility. However, it is a risk these shareholders signed up for, knowing he ran the company when they bought the stock. And it must be up to Tesla’s shareholders, not the government, to decide whether Musk’s tweets are cause for removing him from executive posts.

Based on the charges it alleged, the SEC may have been right in saying Musk’s tweet that he had “funding secured” for taking Tesla private at $420 a share was misleading or even fraudulent. If so, then it was right for the SEC to fine him as an individual for violating securities laws.

But the SEC was wrong in its settlement with Tesla to ban Musk from serving as the company’s chairman and to mandate that Tesla must hire two new directors the SEC deems as “independent” of the company. Those are issues for Tesla’s shareholders to decide.

Some CEOs may indeed need a strong leash, but in a free market, shareholders — the real stakeholders in a company — must be the ones holding that leash.

Originally published at USA Today.