Google Translate

Monday, August 27, 2018

Musk’s U-turn: A subtle poser to his Leadership!

Reversing his decision to take Tesla private, Elon Musk—who in the words of Prof Jeffrey Sonnenfeld, Yale School of Management, is the “…panicky, erratic, possibly self-destructive CEO…”—writing in his late-night blog post on Friday said that as “most of Tesla’s existing sharholders believe we are better off as a public company” he has decided to keep Tesla listed on stock exchanges as even otherwise taking the company private “would be even more-time consuming and distracting.”

Although it is not a surprising decision, what is disturbing (about it) is: Musk’s impulsiveness has caused lot of damage to Tesla’s shareholders. To better appreciate it, let us trace the recent pronouncements of Musk that made a professor to comment: “No CEO is ever this confused and confusing.”

In the run-up to his controversial tweet about his desire to take Tesla private, Elon Musk, the co-founder of Tesla, Inc., an electric car and solar panel manufacturer who manages it as CEO and product architect, in a recent hour-long  interview to  New York Times —alternating between laughter and tears and admitting that he was working up to 120 hours a week—said that work in the current “difficult and painful year of my [his] career” is “rattling his nerves” and even went to the extent of rhetorically offering the reins of Tesla to “…anyone who can do a better job, … They can have the job. Is there someone who can do the job better? They can have the reins right now."

His “excruciating” experiences of the past year could well be understood, for Tesla, while struggling to bring into market its Model 3 mass-market electric car in large numbers, posted a record $ 709 mn loss in the first quarter of this year.  And no wonder if in the process he “didn’t leave the factory for three or four days at a time.” As a result, Musk, aged 47, confesses that he is not in the best of his health. As is commonsensical, this has obviously rocked the stock market: Tesla’s stock fell by 8 percent from $ 360 as on 13 Aug to $ 311 on 17 Aug. But there are many investors for whom Musk is an “incredible leader” and it is hard for them to imagine Tesla without Musk. Some analysts even wanted Musk to get a strong No 2 to run day-to-day operations. A few investors have even tweeted: “The Tesla board of directors needs to step in and hire a COO as early as possible”, so as to afford Musk some respite.  Yet others wondered if he is passing through ‘founder’s dilemma.’

True, in the corporate jungle of the US the CEO who dedicates every second of his life to the company’s success is glorified as an icon worth emulating. And this trait has indeed become the in-thing of Silicon Valley Startups. Young engineers, suddenly becoming bosses, in their anxiety to ‘optimise-everything’ worked so dedicatedly for achieving high workplace productivity, that it often verged on the dangerous. Their starting the day at 5 am after an hour’s workout at Gym followed by ‘bulletproof coffee’, late night dinners at office, lying under the desk in sleeping bag, attending to client calls standing in the check-in queue for the second or third international flightsall this crazy-style of working has simply eroded the boundaries between work and life and this, according to organizational behaviourists, is very damaging for productivity. Such intense work-effort, they aver, is sure to reduce the wellbeing of executives—which even Musk may have to agreebesides worsening career outcomes.  

Besides such intense-wok schedule, the founder CEOs, particularly from technology world, are noted to be prone for “over-managing” the company—one of the cardinal sins of poor leadership. So, from all this what becomes evident is: Musk is stretching too thin. And with such a CEO who sometimes even resorts to Ambien to get to sleep, any wonder if Tesla’s investors dread for their stake!

Earlier this month, Musk—reputed to be an ‘eccentric visionary’— has sparked a furore in the capital markets, the media and among Tesla’s investors by tweeting his intentions to take his publicly traded Tesla private, with the assurance: “Funding secured.” There is a strong belief among the legal fraternity that this tweet may amount to violation of the provisions of the Securities Exchange Act of the US, more so if the company cannot execute the intended action, for it can then turn out to be an act of manipulation of the stock price by the company. Of course, as anticipated, in the wake of this tweet SEC reported to have opened an investigation subpoenaing Tesla. And some analysts opine that this might have prompted Musk’s interview with The New York Times listing out his rattling experiences.  

And intriguingly, if the reports are right, Musk kept his board in dark about his plan of taking Tesla private. Yet, the Board, may be in its anxiety to salvage the position came out with a statement: "There have been many false and irresponsible rumours in the press about the discussions of the Tesla board.  We would like to make clear that Elon's commitment and dedication to Tesla is obvious. Over the past 15 years, Elon's leadership of the Tesla team has caused Tesla to grow from a small start-up to having hundreds of thousands of cars on the road that customers love, employing tens of thousands of people around the world, and creating significant shareholder value in the process." At the same time, the board has also appointed a three-director committee to study the plan of taking it private.

It is of course, a different matter that the board should have simultaneously worked silently for a simple and straight forward solution: identifying someone from the automobile industry known for troubleshooting as the second in command and placing the reins of Tesla in his hands so as to relieve the much stressed-out Musk, at least, for a shorter period on a leave of absence basis, so that Musk could recoup and emerge fit-enough to carry it forward. 

Amidst this storm, now Musk has taken a U-turn, of course, this time round after discussing with the board. Even then, it has made things much worse, for pressure from law suits and the investigations by SEC would cumulatively erode productivity of Tesla’s leadership further.  However, Musk's incredible work ethic, innovative talent and his perseverance to  transform electric car making may place SEC, the regulator in a quandary. 

That aside, this ill-judged tweet, if we may call it so, of Musk to take Tesla private, has thrown open an opportunity for potential buyers to acquire it, for he has even mentioned the price of $ 420 a share. Of course, as of now there appears to be no such move in the market but who knows if somebody with deep pocket comes forward! And should that happen, one wonders if Musk with his 20 percent stake in the company had any protection to block such a bear hug offer. Of course, this threat is yet to emerge. In the meantime, Tesla would have to really struggle to ramp up production so as to improve its valuation so that it becomes difficult for a potential buyer to buy it out.  

The take away from the whole episode is: however incredible a leader might be, he/she should be aware of what he/she is talking. 


Post a Comment

Related Posts Plugin for WordPress, Blogger...

Recent Posts

Recent Posts Widget