Plenty of important and knowledgeable people have already weighed in on Elon Musk’s settlement with the SEC: what it means for the shareholder lawsuits, what it means for the DOJ investigation, whether it’s a good settlement.
I would like to talk about Twitter dot com. I live for this.
Just want to that the Shortseller Enrichment Commission is doing incredible work. And the name change is so on point!
— Elon Musk (@elonmusk) October 4, 2018
Musk’s Twitter use figures heavily in the SEC complaint, and I have repeatedly suggested that Musk is an object lesson for the rest of us about social media: never tweet. (I will never learn this lesson, and probably neither will Musk.) Anyway, from the original complaint:
On Tuesday, August 7, 2018, Musk published a series of statements about a transaction to take Tesla private using his personal Twitter account. Musk did not consult with Tesla’s Board of Directors, any other Tesla employees, or any outside advisors about these tweets before publishing them.
This is honestly not much of a surprise, but it is profoundly unusual. Most CEOs have a huge and mostly invisible apparatus around them to prevent anything horrible from happening. They engage in carefully controlled speech, and even minor appearances are often vetted by legal or public relations, often both, says Evelyn Cruz Sroufe, a partner at Perkins Coie who handles corporate law. Anything a CEO wants to say that’s either likely to generate news or be material to the company is typically aired with the board or a representative of the board; investor relations is typically also involved, she says.
This is assuming the CEOs write the tweets themselves; mostly, they don’t, says David Moyer, the president of executive search firm Moyer, Sherwood Associates. (The firm specializes in communications and investor relations.) For example, if I’m CEO of Ride the Lightning, a company that makes mountain bikes for dirtbags, I am likely not tweeting from my own “personal” account. Instead, someone in the communication department drafts the tweet, someone in legal looks it over, and then I, as CEO, approve it. I don’t write it myself! I am a busy and important dirtbag CEO!
Tweeting CEOs are less unusual in Silicon Valley culture and in the tech space, generally. Most CEOs don’t tweet that much, and the ones who tweet themselves do generally have a working knowledge of SEC regulations — at least, they know enough to avoid saying anything material in a tweet. But Musk’s Twitter use “is pretty unusual because of the volume of stuff he puts out,” Sroufe says, “and the ungoverned nature of what comes out.” Moyer puts it more bluntly: “He’s all id.”
The SEC isn’t the only action Musk has faced as a result of his unfiltered Twitter use. Leaving aside the Justice Department probe into that exact same tweet, there’s also the defamation suit filed by Vernon Unsworth, the cave explorer Musk referred to as a “pedo,” and a complaint from the National Labor Relations Board about anti-union tweets. These are some expensive tweets! Even if Musk wins everything coming at him, he still has to pay $20 million to the SEC plus whatever his lawyers cost. And while lawyers — I love you, you sophists! — are full of entertaining zingers, those zingers are expensive.
So, Musk might welcome some Twitter intervention! In any event, the SEC is demanding that Tesla “put in place additional controls and procedures to oversee Musk’s communications.” Ahhhh. The person screaming “LOG OFF” at Musk’s house is the SEC. (Of course, the settlement might change, as a judge is inquiring about it. Stay tuned for next week, when the SEC and Musk have to put a letter together to justify it!)
But the SEC requirement that someone oversee his tweets doesn’t work if Musk doesn’t go along with it. And it’s not clear how Tesla plans to manage this. Spokesman Dave Arnold told me that the company doesn’t “have anything further to share at this point.”
I hope you enjoy speculation, because I am about to speculate about how this could go. While Musk could hire a factotum to handle his Twitter account — one whose entire job is to tweet normal (?) stuff like Naughty By Nature videos, but vet any Tesla stuff with the board — and never look at Twitter again, that seems unlikely. In the absence of physically inserting a human between Musk’s thumbs and the mobile Twitter app, Tesla will have to rely on Musk’s judgment when it comes to vetting his spicier tweets.
Who would review Musk’s Tesla hot takes? It could be an independent board member or more than one. A committee of independent board members would be a natural choice where Musk could check his tweets, Sroufe tells me. That’s the most flexible way to handle it: to have some independent person with good judgment vetting the tweets before they go live. “Whether he’s willing to do that is a real open question,” Sroufe says.
If he isn’t, it’s not clear what happens next because it’s not clear what kind of formal process the board can impose. “The ideal way is that they take over his Twitter account and review everything, but I just don’t think you’re going to get there with him,” Sroufe says.
One person, an architect of a CEO-public-persona-apparatus for a large tech company you have certainly have heard of, expressed skepticism that Musk would be able to stick to the terms of the SEC deal — at least when it comes to his Twitter use. Musk won’t listen, the person said. Moyer agrees: sooner or later, Musk is going to screw up, he says.
So… what happens then? That part isn’t clear either, even though Musk’s Twitter kerfuffles this year have, so far, cost Tesla shareholders $20 million (plus lawyers’ fees). That may mean the actual enforcement mechanism will end up being shareholder lawsuits. Musk’s tweets are a liability issue as well as a board oversight issue, Sroufe says. If the board cannot set up a process to control the fuego tweets, shareholders are unlikely to be shy about suing. And because Musk has been specifically admonished by the SEC regarding the nature of his Twitter habit, it may be easier for those shareholders to make their cases. The last thing any Twitter user wants is to be accosted by one’s followers.
Look, it’s probably better for Tesla if Musk tweets less — honestly the best-case scenario is for him to delete his account — but it’s worse for me, personally. I like Musk’s tweets! I even like the bad ones! I don’t necessarily love that I have to drop whatever I’m doing (usually editing stuff that’s way less time-sensitive) to report or edit reports on Musk’s tweets, but I’d be lying if I said I didn’t relate. The only people who don’t do dumb shit on Twitter aren’t on Twitter.
Anyway, Musk’s Twitter presence has been educational for me — even just this week! I’ve wondered for years who could possibly use the Apple Stocks app, which I have never once opened. It turns out, the answer is Elon Musk.
Something especially weird going on with Yahoo news feed on iPhone stocks app. Almost always super negative. Maybe getting gamed.
— Elon Musk (@elonmusk) October 2, 2018
With reporting by Nilay Patel.