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If we talk about founders, especially the ones who occupy the positions of chief executives, we can not overestimate the impact which their actions may make. The most striking examples are Travis Kalanick and Elon Musk, who are at the same time are entrepreneurs and stars in the media realm. Kalanick and Musk may have different background but they have the similar behavior towards media and assaults to the company, they did accept any doubt to the efficiency of the company, because the companies were begot by them and run by them. However, to run a startup with 10 people and to run a publicly traded corporation are not the same things because the CEO runs not only own investments to the company but the ones of others. Hence, being extraordinary does not mean ruin someone's investments in your company.
Elon Musk
Elon Musk is undoubtedly an outstanding entrepreneur as well as an explorer who lives in the world of future, furthermore, he creates what was yesterday fantasy like private space transportation services, everyday electric car. The companies, Musk founded and participated in, cover various industries such as electric vehicles, space technology and solar energy. The following table lists the companies he founds or manages at the current stage. [1]

Sources

[1] Crunchbase, 'Elon Musk - Chairman, Product Architect & CEO' https://www.crunchbase.com/person/elon-musk
Elon Musk – it's not boring
However, when some people admire his talent as an entrepreneur, others take delight in gossiping the negative news arising from his inappropriate behaviors. When we take a look at the consequence arisen from his indecent behaviors and the corresponding reactions from the market, we can never deny the fact that the investors would be deeply affected by the misconducts of the founder or the executives of the corporation.

In May 2018 it was reported that Tesla CEO Musk had refused to answer the questions posed by two analysts and referred them as "boring and boneheaded" during Tesla's first-quarter earnings call. This led to a backlash from investors and triggered shares skidding. [1] In August 2018, Musk's attitude obviously turned gentle on the second earnings call and apologized to those two analysts. This behavior along with a promise of profitability had a powerful effect on Tesla's stock. After the Musk's apology Tesla gained additional 8.3 billion dollars to its market capitalization that day. [2]

Indeed, the crisis that Musk caused by his increasingly arbitrary behavior is something unusual. In September 2018 Musk smoked a mix of marijuana and tobacco before cameras when he attended one of America's most popular webcast shows in California. The 'marijuana incident' combined with the resignation of two senior executives lead Tesla's shares to plunge for 6% within just a few hours after that. [3] In addition, Musk's does not keep his mouth shot on social media which is not always evokes positive feedback. He insulted a Thai rescue worker who has saved 12 children's lives on Twitter by calling him a pedophile. Such irresponsible behavior stripped away almost $2 billion from the company's market value. [4] Musk now is getting into trouble again for tweeting about decrying the work of UAW - a labor union representing workers. [5] What's even more surprisingly is that Musk unilaterally tweeted the consideration of privatization of Tesla and mentioned that the funding is secured, walloping the shares price drastically. [6] The table below briefly summarize some of the reckless behavior and the consequences it evokes. [7]


Sources

[1] Mark Matousek, 'Elon Musk slams analysts for asking 'boring, bonehead questions' in bizarre Tesla earnings call' (Business Insider, 3 May 2018) https://www.businessinsider.com/elon-musk-slams-boring-bonehead-questions-in-tesla-q1-earnings-call-2018-5

[2] Emily Bary, 'Elon Musk's apology was worth more than $8 billion to Tesla shareholders—but questions linger' (Market Watch, 6 Aug 2018) https://www.marketwatch.com/story/tesla-stock-soars-after-most-valuable-apology-of-all-time-but-profitability-questions-remain-2018-08-02


[3] Rupert Neate and Julia Carrie Wong,'Tesla shares crash after Elon Musk smokes joint on live web show' ((The Guardian, 7 Sep 2018)) https://www.theguardian.com/technology/2018/sep/07/tesla-chief-elon-musk-smokes-marijuana-on-live-web-show

[4] Casey Quackenbush,'Here's What Happened to Tesla Stock After Elon Musk's Bizarre Attack on Thai Cave Hero'(Time, 17 July 2018) http://time.com/5340621/thailand-cave-rescue-elon-musk-pedo-shares/

[5] Kate Gibson, 'Elon Musk on Twitter is now a labor issue' (MoneyWatch, 29 August 2018) https://www.cbsnews.com/news/elon-musk-on-twitter-is-now-a-labor-issue/

[6] Neal E. Boudette and Matt Phillips,'Elon Musk Says Tesla May Go Private, and Its Stock Soars' (The New York Times, 7 Aug 2018) https://www.nytimes.com/2018/08/07/business/tesla-stock-elon-musk-private.html

[7] Michael Sheetz and Ryan Ruggiero,'Air Force is looking into how to handle Elon Musk's pot smoking'(CNBC, 7 Sep 2018)< https://www.cnbc.com/2018/09/07/air-force-is-looking-into-elon-musks-pot-smoking-source.html >accessed 26 Sep, 2018; TOM KRISHER,'Diver who helped with Thai cave rescue sues Elon Musk'(AP news, 17 Sep 2018) <https://apnews.com/4f4ddea4fa0c43ae984447fae85cf644 >accessed 26 Sep, 2018; Chris Isidore,'Elon Musk may have violated labor laws with a tweet'(CNN Tech, 29 Aug 2018)< https://money.cnn.com/2018/08/29/technology/elon-musk-tweet-nlrb-complaint/index.html >accessed 26 Sep, 2018
Elon Musk's abnormal behavior and consequences
Furthermore, noting that the SEC has reportedly issued a subpoena to Tesla on Elon Musk's tweet regarding the privatization of Tesla and his final decision to let the company stay public in the end. [1] Such a subpoena would be one of the first steps in a formal inquiry. [2] Arguably, there are certain possibilities for Musk to violate the SEC Rule 14e-8 which aims to prevent manipulation of the stock price. [3] Though the SEC refuses to give comments before the final results come out and tends to keep actions implicitly [4] . It directly related to the key issue regarding whether the announced privatization of Tesla is untrue or half-baked. If so, there will be sufficient grounds for the SEC to suspect Elon Musk as a Tesla's CEO for committing a fraud or even market manipulation on an illegal base. [5] However, Musk argued that the reason why he tweeted about Tesla's privatization publicly was because he wanted all the shareholders to receive such important news from Tesla. Moreover, he explained he had reached a promising deal with the Saudi sovereign fund unreasonably posting a tweet 'funding secured'. [6] Even so, other than the relevant authority, several investors are filling securities fraud lawsuits against Musk, alleging that he had deliberately published false announcement to squeeze out short sellers. [7]

All of these abnormal behaviors and the investigation from the SEC make the investors wonder whether the companies led by such a crazy man are still worth to invest. And in case of Tesla the Board warned its wayward the CEO not to update his twitter anymore. However, Musk poured scorn on the advice. [8]


Sources


[1] Elon Musk,'Staying Public' (Tesla, 24 August 2018) < https://www.tesla.com/blog/staying-public >accessed 26 Sep, 2018


[2] Matthew Goldstein, Jessica Silver-Greenberg and Kate Kelly,'Tesla Is Said to Be Subpoenaed by S.E.C. Over Elon Musk Tweet'(The New York Times, 15 Aug 2018)<https://www.nytimes.com/2018/08/15/business/tesla-musk-sec-subpoena-goldman.html> accessed 25 Sep, 2018


[3] Jeffrey A. Newman,'Did Elon Musk didn't violate SEC regs on market manipulation by speaking publicly about taking Tesla private?'(JefferyNewman Law, 10 August 2018)< https://www.whistleblowerlawyernews.com/did-elon-musk-really-violate-sec-regs-on-market-manipulation-by-speaking-publicly-about-taking-tesla-private/ > accessed 25 Sep, 2018


[4] Matt Robinson and Benjamin Bain,'SEC Could Face Backlash if Elon Musk Is Exonerated'( bloomberg, 22 Aug 2018) < https://www.bloomberg.com/news/articles/2018-08-22/tesla-probe-fuels-worry-in-sec-about-fallout-if-musk-exonerated> accessed 25 Sep, 2018


[5] Aarian Marshall,'ELON MUSK AND HIS FIGHT WITH THE SEC'( Wired, 15 Aug 2018)<https://www.wired.com/story/tesla-private-elon-musk-sec-investigation/>accessed 25 Sep, 2018


[6] Elon Musk,'Update on Taking Tesla Private' (Tesla, 13 August 2018) < https://www.tesla.com/blog/update-taking-tesla-private >accessed 26 Sep, 2018


[7] Mark Matousek,'Pressure mounts on Tesla as it gets hit with a third securities fraud lawsuit in wake of Elon Musk's 'funding secured' tweet' (Business Insider, 14 Aug 2018)< https://www.businessinsider.com/tesla-hit-with-new-lawsuit-alleging-elon-musk-manipulated-stock-price-2018-8 >accessed 25 Sep, 2018


[8] Andrew Ross Sorkin, Jessica Silver-Greenberg, Kate Kelly and Neal E. Boudette,'Tesla Directors, in Damage Control Mode, Want Elon Musk to Stop Tweeting' (The New York Times, 14 Aug 2018)) <https://www.nytimes.com/2018/08/14/business/dealbook/tesla-board-musk-tweets.html?module=Uisil> accessed 18 Sep, 2018
Travis Kalanick
Behind the huge success of Uber, one person has made undeniable contributions - the co-founder as well as former CEO of Uber - Travis Kalanick. Under his leadership and management, Uber has become the world's most highly valued unlisted company with a nearly $70 billion valuation in its seventh year. [1] He has also founded and once managed a multimedia search engine named Scour and several file-sharing companies. [2] Last year, he resigned as CEO of Uber where he devoted himself for eight years and remained his seat on the Board. [3] Recently, after taking indefinite leave of absence from the position of CEO of Uber, Kalanick launches a venture fund called 10100 and starts to take over a real estate start up. [4] However, as a founder and chief executive of the corporation, his pugnacious personality and aggressive way of managing corporations often destroy the corporations' reputation thus harming the investors' interests.

Almost everyone has heard more or less a series of scandals regarding Uber recent years — a company whose negative news has stolen the headlines of news in tech sector for nearly half a year. One of the most intriguing topics among these news is Uber's strange culture on sexual harassment.The story becomes public with a blog posted by former Uber engineer Susan Fowler, describing the sexual harassment she encountered during her work at Uber and the tolerance attitude HR adopted on these sexist incidents. [5] In addition, in accordance with the data provided by CNN, more than 100 of the Uber drivers in US have been accused of sexually assaulting or sexually harassing female passengers during the past four years. [6] Besides the negative corporate image of Uber regarding sex, Uber had also formed a 'hustle-oriented' culture under the leadership of Travis. Indeed, Uber is always considered to be aggressive and brutal during the process of its expansion of market. For instance, Uber has once been accused of using secret "Greyball" technology to dodge certain groups of people, including competitors and law enforcement officers. [7] Furthermore, the company was also sued by a Google's subsidiary for stealing confidential technical information to develop driverless technology, undermining Uber's reputation sharply. [8] Therefore, the Uber's culture was often commented by the outsider as a toxic world. As a consequence of theses scandals, there are reports mentioned that the market valuation of Uber has appropriately dropped 10 billion due to the break of scandals. [9]

So here comes the questions, what's wrong with Uber? Why it has conducted so many immoral events which were heavily criticized by the public? Certainly, we can't simply blame one person for the chaos that a company has been unable to solve for a long time. However, one can never deny the fact that Travis Kalanick, as the founder of Uber, has set the tone for the company's development. As we mentioned above, Uber is now facing a series of scandals on sex harassments. Even if Kalanick himself did not commit these unethical actions, his way of tackling the crises laid a bad influence on company's reputation. For instance, Kalanick has once described 'Uber' as 'Boober' when he talked about Uber and his working style with GQ magazine in 2014 for the reason that the company helps him win more scores from women. [10] Moreover, Kalanick has personally written 14 core values of the company and every new Uber employee would be asked to subscribe to these core values including 'meritocracy and toe-stepping' which direct the employees to take great effort to climb to the top even by toeing on other's feet. [11] Therefore, it is not surprising that the workers at Uber tend to compete with each other by hook or by crook and the executives always turn a blind eye to it. Indeed, such 'hustle-oriented ' culture as suggested and advocated by Kalanick is keeping with his employees' behavior to use improper means to squeeze out colleagues and external competitors such as Gett [12] and Lyft [13] . The internal unscrupulous competition and the 'hustle-oriented' high-pressure corporate culture as set by Kalanick allowed Uber to obtain a miraculous high-growth, revenue and valuation meanwhile making the company's reputation increasingly being criticized by investors and the public. The table below briefly summarizes Kalanick's actions and the impact of these actions on the company. [14]



Sources

[1] The Economist, 'From zero to seventy (billion)' ( SAN FRANCISCO, 3 Sep 2016< https://www.economist.com/briefing/2016/09/03/from-zero-to-seventy-billion >

[2] Maya Kosoff, 'Travis Kalanick's first company got sued for $250 billion — so he started a new 'revenge business' that made him a millionaire' ( Business Insider, 8 Sep 2015)< https://www.businessinsider.com/travis-kalanicks-first-company-got-sued-for-250-billion-so-he-started-a-new-revenge-business-that-made-him-a-millionaire-2015-9 >accessed 27 Sep 2018

[3] Bryan Logan and Biz Carson,'Travis Kalanick resigns as Uber CEO'( Business insider, 21 Jun 2017)< https://www.businessinsider.com/uber-ceo-travis-kalanick-out-2017-6>accessed 27 Sep 2018

[4] Ananya Bhattacharya,'Travis Kalanick is taking his next big idea to India'( Back Again, 8 Mar 2018)< https://qz.com/india/1224376/10100-after-uber-travis-kalanicks-new-venture-will-invest-in-startups-in-india-and-china/> accessed 27 Sep 2018

[5] Susan Fowler,'Reflecting On One Very, Very Strange Year At Uber' (February 19, 2017)<https://www.susanjfowler.com/blog/2017/2/19/reflecting-on-one-very-strange-year-at-uber>accessed 28 Sep 2018

[6] Sara Ashley O'Brien, Nelli Black, Curt Devine and Drew Griffin,'CNN investigation: 103 Uber drivers accused of sexual assault or abuse' (CNNTech, 30 April 2018)< https://money.cnn.com/2018/04/30/technology/uber-driver-sexual-assault/index.html > accessed 28 Sep 2108

[7] Julia Carrie Wong,'Greyball: how Uber used secret software to dodge the law' (The Guradian, 3 Mar 2017)<https://www.theguardian.com/technology/2017/mar/03/uber-secret-program-greyball-resignation-ed-baker> accessed 28 Sep 2018

[8] Ian Wren,'Uber, Google's Waymo Settle Case Over Trade Secrets For Self-Driving Cars' (The two-way, 9 Feb 2018)<https://www.npr.org/sections/thetwo-way/2018/02/09/584522541/uber-googles-waymo-settle-case-over-trade-secrets-for-self-driving-cars> accessed 28 Sep 2018

[9] Anita Balakrishnan, 'Scandals may have knocked $10 billion off Uber's value, a report says' ( CNBC, 25 April 2017)< https://www.cnbc.com/2017/04/25/uber-stock-price-drops-amid-sexism-investigation-greyballing-and-apple-run-in--the-information.html > accessed 28 Sep 2018

[10] Mickey Rapkin,'Uber Cab Confessions' (GQ, 27 Feb,2014)< https://www.gq.com/story/uber-cab-confessions?currentPage=1> accessed 1 Oct 2018

[11] Mike Isaac,'Inside Uber's Aggressive, Unrestrained Workplace Culture'( The New York Times, 22 Feb 2017) < https://www.nytimes.com/2017/02/22/technology/uber-workplace-culture.html>accessed 2 Oct 2018

[12] Casey Newton,'This is Uber's playbook for sabotaging Lyft'(The Verge, 26 Aug 2014) < https://www.theverge.com/2014/8/26/6067663/this-is-ubers-playbook-for-sabotaging-lyft > accessed 2 Oct 2018

[13] Erik Sherman,'Lyft accuses Uber of trying to disrupt its service'( Money Watch, 12 Aug 2014)<https://www.cbsnews.com/news/lyft-accuses-uber-of-trying-to-disrupt-its-service/> accessed 2 Oct 2018

[14] Harrison Weber,'Timeline: How Uber's valuation went from $60M in 2011 to a rumored $50B this month'(VB, 10 May 2015)<https://venturebeat.com/2015/05/10/timeline-how-ubers-valuation-went-from-60m-in-2011-to-a-rumored-50b-this-month/>accessed 2 Oct 2018 ; Kate Taylor,'40 of the biggest scandals in Uber's history'( Business insider, 24 Nov 2017)<https://www.businessinsider.com/uber-company-scandals-and-controversies-2017-11> accessed 2 Oct 2018
Summary
From all we have discussed above, it is not difficult for us to notice the key role the founders or executives played when establishing the corporate image. Clients tend to link the founders image to the corporate image since the founder's behaviors imperceptibly play a leading role for the employees and thus gradually transforming into a company's core values. [1]

Since the improperness of the founder or officer would directly hurt the interests of investors, then whether investors can impose any ethical restrictions on founders and/or officers or not? Indeed, various jurisdictions have set up different mechanisms which facilitate investors to impose ethical limitations on the founders or officers of the corporations.

For instance in the USA, the Code of Business Conduct of a Corporation would assist investors to impose ethical limitations on executives or founders of the corporation. Such document normally describes the ethical rules an entrepreneur should follow. The reason why most of the US corporations adopted it is probably because the Securities and Exchange Commission (SEC) has implemented section 406 of the Sarbanes-Oxley Act of 2002, which requires public companies to disclose whether they have equipped with the Code of Conduct (CC) for their senior financial officers. If the corporation has no CC, it needs to explain why the Code of Conduct was not introduced in the company. [2] [3] Furthermore, the New York Stock Exchange and the Nasdaq Stock Market both set the requirements to have a Code of Ethics which would be applicable to all employees, senior management, and directors as an essential condition for public companies to be listed on markets. [4] In spite of the fact that the ethical standards and consequences of violations that are contained in such code may vary from company to company, at least it provides possible approach for investors to impose ethical restrictions management. In addition, the US Regulation S-K [5] also requires a public held company to disclose the family relations and moral character of all directors and executive officers, indirectly imposing an ethical restrictions on them.

In addition, if it goes about the restriction of founder or executives' immoral behavior and investors' interests protection, we have to mention another important role in the corporation - an independent director. An independent director is neither an executive officer of a publicly held corporation nor does he own a direct or indirect relationship with the company business. [6] In general investors are able to impose restrictions on executives' improper behavior by the decision of board of directors. However, since in some large publicly owned companies, the boards are increasingly dominated by chief executives officers or founders the company gradually fell under the control of such bodies. The purpose of setting up independent directors is to alleviate this phenomenon and to let them play a supervisory role to regulate the behavior of the officers, thus protecting the rights and interests of investors. The independent (non-executive)director system originated in US is now widely adopted not only by most of the European countries like UK [7] but also by Asian countries like China [8] and Middle Eastern countries like UAE [9] .

Based on example of Elon Musk and Travis Kalanick it is evident that every movement of founders or executive officers of a corporation may affect the interests of the investors, especially when it is talked about those publicly held corporations. To avoid unpleasant consequences the investors should think impose ethical restrictions on senior management. The founders or executive shall keep in mind that they should be cautious when referring to material events which would influence the development of the corporations and the interests of investors.
Sources


[1] Schein, Edgar H, 'The role of the founder in creating organizational culture' (1983) 1 OD 12, 13–28; Fassin, Y., Rossem, A. V., & Buelens, M,' Small-business owner–managers' perceptions of business ethics and CRS- related concepts' (2011) 3 JBE 98, 425–453


[2] Section 406 of Sarbanes-Oxley Act of 2002


[3] SEC, Disclosure Required by Sections 406 and 407 of the Sarbanes-Oxley Act of 2002, Release No. 33-8177, 34-47235


[4] SEC, NASD and NYSE Rule making: Relating to Corporate Governance, Release No. 34-48745


[5] Item 401 of Regulation S-K


[6] Robert W Hamilton, The Law of Corporations, ( 5th edn ,West Publishing Company 1999 ), 571


[7] UK Corporate Governance Code, A.4


[8] Clarke Donald C,"The independent director in Chinese corporate governance." (2006) 31 DJCL 125


[9] Corporate Governance in the UAE Legislation, Branch V-e1

Author of the article
Kastrama Siarhei