DealBook Briefing: The SEC Can’t Change Elon Musk


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Elon Musk reached a deal with the S.E.C. on Saturday night to resolve securities fraud charges tied to his bid to take Tesla private. The deal requires him to step aside as the automaker’s chairman for three years — though he can remain C.E.O. — and pay a $20 million fine. Tesla must also name two independent directors and monitor Mr. Musk’s communications with investors.

Mr. Musk spoke with Mark Cuban, an entrepreneur who had his own battles with the S.E.C., before reversing his decision to settle.

The deal means that Mr. Musk won’t risk being banned from serving as an executive or director of a public company, and came about under pressure from lawyers and shareholders. (Tesla’s shares plummeted on Friday, giving short sellers $1.3 billion in profit.)

But how much will really change?

Investors express hope that new board members will force Mr. Musk to focus on solving Tesla’s many problems. In particular, the need to appoint a new chairman could give Tesla a chance to install an outsider with a fresh perspective.

But critics quickly pointed out that the new chairman would probably hold the job for a short time. And the two new directors could be outvoted by the other board members, who are widely considered close to Mr. Musk. (Among them is his brother, Kimbal.)

The company’s policing of Mr. Musk’s communications with the outside world may be the largest change, given how much trouble his tweets have caused. But little has changed so far: He emailed Tesla employees on Sunday to promise that Tesla could turn a profit soon. And this morning he tweeted a link to the music video “O.P.P.” by … Naughty by Nature.

Bonus: It’s worth reflecting on the message the S.E.C. sent here. Mr. Musk reportedly backed out of a settlement with the agency last Thursday, adamant that he had done nothing wrong. In settling just two days later, the S.E.C. appeared to have been accommodating of the Tesla chief’s quick change of heart.

The U.S. and Canada struck a last-minute deal to salvage the trade pact last night. The agreement saves the 25-year-old trilateral pact, which had been close to collapse after months of bickering.

The deal — which will now be called the “United States-Mexico-Canada Agreement” — includes big concessions:

• Canada will ease protections on its dairy industry and give the U.S. more access to its markets.

• The U.S. won’t eliminate an independent tariff dispute system or impose auto tariffs on Canada. (Aluminum and steel ones may remain, though.)

Sunday’s breakthrough came after Prime Minister Justin Trudeau of Canada became involved in the talks over the weekend. He even asked Mexico, which had already reached an accord with the U.S., to intervene.

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Both sides see this as a win. But President Trump may celebrate most: As the WSJ notes, it shows his administration can actually strike trade deals, not just rip up old ones or impose tariffs.

The social network disclosed a huge data breach on Friday, in which the accounts of more than 50 million users were compromised. The largest such event so far in the company’s 14-year history, it allowed hackers to gain access to accounts and potentially take control of them.

Facebook will come under intense scrutiny for the hacking — especially in the E.U., whose tough new General Data Protection Regulation can inflict big fines if a company did not do enough to safeguard user data. The WSJ explains that the social network could face a maximum penalty of $1.63 billion if that is found to be the case.

The hacking is another headache for Facebook. The company has been buffeted over the last year by scandals including the abuse of user data and the manipulation of the social network for election meddling.

Goldman Sachs’s new C.E.O. starts. David Solomon takes the reins of the Wall Street firm from Lloyd Blankfein. His ascension comes as Goldman reduces dependence on trading, to favor businesses like investment banking and consumer lending.

Eurogroup finance ministers meet. They will discuss growth and jobs as well as exchange-rate developments in preparation for meetings of the I.M.F. and the G-20 countries in Bali, Indonesia, in October.

Britain’s Conservative Party holds its annual conference. Prime Minister Theresa May will confront many vocal critics of her Brexit strategy, and could find herself in a tussle to keep control of the party.

The Supreme Court begins a new term with eight justices. For the moment, the court is split down the middle ideologically.

California on Sunday adopted its own net neutrality regulations, after the F.C.C. rescinded its rules last year. Hours later, Justice Department officials told The Washington Post that the administration would sue to block the move.

California’s new laws are tougher than those enacted by the Obama administration. They forbid internet service providers from intentionally slowing web services or blocking online content, and ban them from accepting money to make some services run faster.

The F.C.C. had warned that such efforts could face legal action. Attorney General Jeff Sessions said that California had “enacted an extreme and illegal state law attempting to frustrate federal policy.”


More on what it means, from Tony Romm and Brian Fung of the WaPo:

The F.C.C.’s efforts immediately put Washington on a collision course with the states. To start, more than 20 states filed lawsuits against the F.C.C., arguing that the agency had acted arbitrarily in repealing the net neutrality rules. Their efforts have won the support of companies like Mozilla and trade associations representing tech giants including Amazon, Facebook and Google.

The state now requires public companies based there to have a minimum number of female directors. The new law, the first of its kind in the U.S., mandates that companies must have at least one woman on their board by the end of 2019.

About 165 companies will be affected. Facebook and Tesla don’t currently comply, for example, and will need at least three women on their board by 2021.

The bill has detractors. Even Gov. Jerry Brown acknowledged that the law could face legal challenges.

Charles Elson, a corporate governance expert at the University of Delaware, told the NYT that companies “should be able to elect any representatives they want.”

Most people remember 2016 for continued economic growth, falling unemployment and continued consumer spending. But Neil Irwin of the Upshot points out that it brought economic trouble for the industrial sector in the U.S., as a web of global events made life difficult.

There was a sharp slowdown in business investment, caused by an interrelated weakening in emerging markets, a drop in the price of oil and other commodities, and a run-up in the value of the dollar. The pain was confined mostly to the energy and agricultural sectors and to the portions of the manufacturing economy that supply them with equipment.

The mini-recession ended when China let banks borrow more and the Fed held interest rates steady. But Mr. Irwin notes that the dip may have had serious consequences — including making Donald Trump’s economic message more attractive to those in the affected industries.

Compensation in the start-up scene is often intensely guarded. But the venture capital firm Andreessen Horowitz has compiled industrywide data on pay, based on surveys of executive search firms, and Business Insider got its hands on a copy from 2017. Here are some insights:

• The median salary offer for a C.E.O. role at a Series C consumer products company is $325,000 in cash, with a 50 percent bonus and a 6 percent stock grant.

• The median salary for a senior director of engineering at a young Series A start-up is about $200,000 in cash, with a 0.58 percent stock grant.

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Business Insider created interactive charts using the data, and they are worth studying to see how much these workers make — and how companies alter compensation as they get older.

ThyssenKrupp named Bernhard Pellens as its new chairman and Guido Kerkhoff as its permanent C.E.O.

Thomas Kurian resigned as Oracle’s president of product development.

WorldQuant, a Connecticut hedge fund, turned to an unusual recruitment tool: a global talent contest.


• Saudi Arabia has reportedly halted work on a $200 billion solar power joint venture with SoftBank. (WSJ)

• Slack is said to be working on an initial public offering. (WSJ)

• Husky Energy bid $2.6 billion for a fellow Canadian oil producer, MEG Energy. (WSJ)

• Paris appears set to become Europe’s new financial trading hub after Brexit. European banks are weighing closing out derivative positions in London before then.

Politics and policy

• Democratic lawmakers have complained that the F.B.I. inquiry into Brett Kavanaugh is too limited. Several people who hoped to contribute to the investigation say they can’t get through to the agency.

• Few in Washington now care about rapidly growing budget deficits. (Bloomberg)

• Democratic lawmakers who argue that President Trump violated the Constitution because of his business ties to foreign governments can sue, a judge ruled. (Fortune)

• The Trump administration is preparing to weaken mercury emissions rules. (NYT)


• Chinese manufacturers scaled back production amid the trade war with the U.S. Amid the feud, Beijing canceled an annual security meeting with Washington.

• Iranian officials say they’re close to a deal on selling oil to Europe, despite U.S. sanctions. (NYT)

• Toyota may temporarily shutter its main plant in Britain if the country leaves the E.U. without a deal. (FT)


• Google’s C.E.O., Sundar Pichai, agreed to testify before Congress later this year. (NYT)

• Why Tesla’s union lawsuit may be a turning point for the tech industry. (Verge)

• Jack Ma has given up ownership of the legal entities at the heart of Alibaba. (FT)

• Internet and social media use are plateauing in America. (Pew Research Center)

• U.S. investigators failed to force Facebook to wiretap voice calls made by its Messenger app. (Reuters)

Best of the rest

• What Jamie Dimon of JPMorgan Chase said at a TimesTalk about the importance of women leaders in the workplace. (NYT)

• Kosher bacon: an impossible goal? (NYT)

• How Procter & Gamble is trying to fix itself. (WSJ)

• Two-thirds of American business economists expect a recession before 2021. (Bloomberg)

• Over half the world’s population is now middle class. (FT)

• Can one bank reshape Russia? (FT)

Thanks for reading! We’ll see you tomorrow.

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