He reportedly tore up a settlement at the last moment. Fireworks!
The settlement would have allowed Musk to remain CEO (in charge of the company). The board of directors is in charge of the CEO... and Musk would have been allowed to remain a director (just not the leader / chairman of the directors).
It was a super-lenient deal. I'm surprised Musk rejected it. True, the SEC was forcing Musk to take on 2-new board members, but Musk still has all of his old buddies on the board and would have likely remained in severe control of the company.
Note that as the biggest shareholder, Musk also has the ability to vote on who comes and goes on the board-of-directors, and thus he'd be able to effectively choose the chair as well !! So Musk ultimately would have STILL remained in charge of the company by a severe margin.
Musk is a big shareholder, is on the board of directors, AND is the CEO. He's the fox guarding the hen-house. Completely legal because companies can operate however they want... but SEC was trying to get the board of directors to at least look like they were somewhat independent. I mean, it probably would have been good for Tesla to get a more independent looking board...