Posted by Aishwarya Rai.
Tesla, the Palo Alto-based automative and energy company, has been subject to much staggering lately, due to the conduct of its ex-Chairman and CEO, Elon Musk. Musk and Tesla have been subject to inquiries by the Department of Justice (DOJ) and Securities and Exchange Committee (SEC), as a result of Musk’s conduct; Musk tweeted about taking the company private, stating that funding had already been secured and shares would be priced at $420. Additionally, Musk made reference to those betting on shorting Tesla stocks by mentioning them and the “burn of the century.” Further details showed that Musk had no such funding secured, all whilst Tesla stocks zoomed upwards and short-sellers did in fact face losses.
This led to the DOJ and SEC to inquire into Tesla’s conduct as the tweets seemed to show that Musk misled the market to believe that Tesla would undergo privatization and thus gain some greater market value. When it was revealed that Tesla did not have the required amount of capital to go private, the SEC deemed that Musk’s actions were done to increase stock value and to financially harm short-sellers, making it an act of bad faith.
Furthermore, Musk’s actions showed a lack of ethical consideration as he seemed hostile towards short-sellers. Musk has a responsibility to shareholders as a CEO and the accuracy and truthfulness in the information he disseminates falls under this stipulation. Other acts that put his ethics in question were smoking on a podcast with Joe Rogan, which may go against Tesla’s codes of conduct as it can be said that he was acting as the CEO of the company while on camera.
These incidents put into perspective the need for important business officials to be mindful of the ripple effects of their actions on their fellow employees, clients, and shareholders. The effects of bad conduct, whether intentional or not, can be harmful and put companies at risk of failure. Accurate information is what creates a safe market, legally and financially.
Aishwarya is an economics and finance major at the Stillman School of Business, Seton Hall University,
Class of 2020.