NEW YORK - The Securities and Exchange Commission has given an unsubtle hint to Tesla's investors. The watchdog is using Saturday's settlement with Chief Executive Elon Musk over his misleading tweets about a buyout to impose some much needed adult supervision. It's up to shareholders to push for a broader governance overhaul.

Musk settled after Tesla's shares plunged 14 percent on Friday - a day after the SEC sued him, following his rejection of an earlier settlement. Musk will give up his role as chairman for at least three years, making way for an independent candidate. The $45 billion electric-car maker has to add two unbiased directors in total. Musk is neither admitting nor denying the SEC's fraud charges, and he is getting off fairly lightly. There's a $20 million fine for the billionaire boss and the company alike, but Musk is allowed to remain as chief executive.

Nonetheless, it's a promising start at a revamp of Tesla's overly tolerant board. In addition to Musk and his brother Kimbal, four of the seven remaining directors have close ties to the CEO and former chairman – including Antonio Gracias, the notionally independent lead director.

Tesla could make Gracias chairman, but that is surely not the regulator's intent. The SEC's aim is to foster better oversight of Musk. That's a task the current board has singularly failed at, curbing neither his wayward use of Twitter nor his penchant for setting goals the company then misses.

Bringing in a savvy elder statesman of the car industry would be a far better choice: Alan Mulally, for example. The former Ford boss and Boeing executive has the engineering nous and organizational acumen Tesla needs. His experience dealing with the Ford family, which controls 40 percent of the voting stock in the automaker, could help with Musk, who owns a fifth of Tesla and is personally associated with the company's brand.

A strong chairman would, though, just be a start. Even shareholders with faith in Musk ought now to see the value of making the chairman-CEO split permanent and replacing Musk's board pals with more independent directors. Hiring an operationally skilled deputy and sorting out a proper succession plan wouldn't go amiss either. The SEC has kicked off changes that should better channel Musk's energy. Now it's the shareholders' turn.

CONTEXT NEWS

- Tesla Chief Executive Elon Musk on Sept. 29 agreed to a settlement with the Securities and Exchange Commission over charges Musk made "false and misleading statements" about a plan to take the electric-car maker private.

- As part of the agreement Musk is to step down as chairman, to be replaced by an independent candidate, and he will be ineligible for reelection to the post for three years. Tesla must appoint a total of two new independent board members. It also must set up a committee of independent directors as well as measures to control how Musk communicates with investors, including via Twitter.

- Musk and Tesla will also each pay a $20 million fine. The CEO and the company are neither admitting nor denying the SEC's charges.

- The SEC on Sept. 27 sued Musk, seeking to have him banned from being an executive or director at any public company, after he rejected an earlier settlement deal.

(Editing by Richard Beales and Amanda Gomez)

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