Corporate Citizenship Audit

Tesla’s CEO Elon Musk has recently made a tweet suggesting that he was taking the company private once stock hit $420 per share. This has caused uproar with the Securities and Exchange Commission (SEC). The central concern for the SEC is that Musk made it seem like he already had the money lined up and the price confirmed, with a shareholder vote being the only thing standing between him and privatizing Tesla.

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(Irfan 2018). Since this tweet has caused so many issues, Musk has tried to backtrack but people are not letting it go. The Department of Justice has launched a criminal investigation and the SEC has now filed a suit against Musk. The SEC has gone through all of the aspects of this scandal including Musk taunting short sellers of company’s stock months before the tweet was written. Because of this and many other bizarre turns the SEC has decided that Musk should be fined and banned from serving as an executive or board member of any public company. The main concern with Musk’s tweet is that he already had everything set up to privatize the company. But this was not the case, few other people knew about the idea, no funding was guaranteed, and prices were not finalized. So Musk made this tweet without any evidence to back it up. This caused uproar for all investors and stakeholders for no reason.

Corporate social responsibility is defined as the conscious effort to operate in a manner that balances stakeholder interests. (Lussier 2018). Tesla’s mission is to accelerate the world’s transition to sustainable energy. (Tesla 2018). Telsa is socially responsible because it focuses on their mission and tries to make the world a better place. On the corporate citizenship scale Tesla would be rated Level 5: Altruistic. Tesla’s primary corporate mission is focused on creating a better environment. They align all their products to fulfill their mission which is about creating a better environment. Tesla also tailors their marketing and communication towards their environmental protection efforts. Tesla, Inc. addresses stakeholders’ interests through a corporate social responsibility strategy that focuses on sustainability and environmental friendliness of automotive, energy storage, and energy generation products. (Greenspan 2018). By having this approach, Tesla’s stakeholders are benefitting and their brand image is improving. When the stakeholders benefit, Telsa benefits because the happier they are with the company the more they will put into the company. Tesla’s main stakeholders, in order of importance, include: communities (highest priority), customers, employees, investors/shareholders and governments. Tesla and communities directly benefit from each other. Communities benefit through development strategies that are made with Tesla’s cutting edge technology.

Tesla benefits from satisfying community needs because it boosts their image. Customers are a direct influence on Tesla’s revenues so the company works towards creating a better quality product at a better price. Since these consumers have such a direct influence on the company, Tesla gears their corporate social responsibility efforts toward the needs on customers, such as minimizing costs and improving accessibility such as adding more charging stations. Employees are important to Telsa because they directly influence productivity and the company’s performance. Tesla then compensates their employees by offering high compensation and offering new career opportunities. Investors and Shareholders are obvious stakeholders of the company because their funds directly helped the company. These investors and shareholders are interested in the profitability and growth of the company. Tesla uses corporate social responsibility to work towards these interests and aims to transform energy and automotive business. The environmentally friendly ideals in their corporate citizenship approach is in line with the current trend of being green. This makes Tesla more appealing to green consumers which in turn makes the investors and shareholders more profitable. The government is concerned with Tesla’s legal compliance and their contribution to economic growth. Being corporately responsible not only benefits citizens and stakeholders but it benefits Tesla themselves. The benefits that come with being socially responsible are: enhanced reputation, customer loyalty, better employee relations, and awards. (Lussier 2018). So Telsa and the stakeholders both have many reasons to be socially responsible.

Elon Musk’s tweet caused problems that are relevant in the economic and social spheres. By stating that the company would be going private once stocks hit $420 per share, Musk caused trading fever. The tweet pushed Tesla’s stock price up 6% and Tesla’s trading needed to be halted for an hour and a half until Tesla gave a formal statement. The company’s stock price closed at $379.57 on the day of the tweet. (Irfan 2018). The tweet also caused social problems because it makes Tesla seem unreliable. Musk tweeted based off assumptions and contrary to facts that he was aware of. The tweet made it seem like Musk had all funding secured and he was only waiting on a shareholder vote when in fact nothing had been discussed. This impacted Tesla’s stakeholders. Employees were impacted by this tweet because they were not aware of what was happening and thought that the company was making decisions without first informing them. Also, the tweet caused charges against Tesla which may impact the employees bonuses and might even cause a few to be laid off. Investors and stockholders were impacted by this tweet because the company they put their money into was changing without their consent. The tweet came as a shock to them because no definite plans of going private were discussed. The government was also impacted by Musk’s tweet. Governments are interested in the legal compliance of companies and their contribution to economic growth, Musk’s tweet went against both these interests. The tweet was illegal because companies and executives are not allowed to provide inaccurate information to shareholders about major corporate events. Also, the tweet caused an increase in Tesla’s stock price and had trading halted for 90 minutes which impacts economic growth.

I believe this scandal happened because Musk has never been reprimanded for his actions. Musk accused a British cave diver of being a child abuser with no evidence to back up his statement. The diver, Vernon Unsworth, aided the rescue of 12 teenagers in Thailand from a flooded cave. In July he deleted the tweets but last week he appeared to repeat his allegation, tweeting that it was “”strange he hasn’t sued me”” after Mr. Unsworth said he was considering legal action. (BBC 2018). This gave the diver a bad reputation based on crimes he did not commit. During a Joe Rogan podcast, Musk smoked weed and drank whiskey and this added to previous concerns about his drug use. This also angered Tesla employees who are subject to drug testing. This showed lower Tesla employees that they are held to a higher standard than Tesla executives. Even though Musk has engaged in these behaviors Tesla has not let go of him. They think that by letting go of Musk, they will lose some of their following. The cult of Elon Musk and the belief among many of the entrepreneur’s fans that he is a genius who alone can lead Tesla has allowed him to keep a tight grip on the electric car company. Many investors are in Tesla because they believe in Musk, and if he were to exit, it’s unclear what might happen to its stock price. (Stewart 2018). So they believe having Musk, even with all of his antics, is more important than the trouble he causes the company.

I believe that if Tesla punished Musk for his actions he would be more likely to change his behavior. He should be suspended from his company for a period of time or given a large fine. Also, a contract should be put in place limiting what he is allowed to discuss to the public. This way, he cannot leak any premature information and the company can be saved from fines and from legal action. This recommendation is relevant and effective because it will help keep him from damaging the brand further but the company can still keep him for the good publicity that he brings.

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