compose an analytical case study about a specific strategic decision made by a particular organisation. Your specific objectives are to:
- Describe the decision.
- Explain why the organisation made it.
- Evaluate the ethics of the decision and suggest what the organisation could have done differently.
Full Answer Section
Why the Organization Made It: Tesla, under Musk, faced intense pressure in 2018:
- Short-Seller Pressure: Tesla was one of the most heavily shorted stocks. Musk believed short sellers were spreading misinformation to drive the stock price down, harming the company and distracting employees.
- Quarterly Earnings Scrutiny: As a public company, Tesla faced relentless pressure to meet quarterly earnings and production targets (especially for the Model 3), which Musk felt forced short-term decisions detrimental to long-term goals like sustainable energy transition and autonomy development.
- Desire for Long-Term Focus: Musk argued that being private would free Tesla from the "quarterly earnings cycle," allowing management to focus purely on long-term mission execution without market volatility and shareholder pressure.
- Musk's Personal Frustration: Musk expressed deep frustration with public markets, investors, and regulators, believing they misunderstood Tesla's mission and hindered its progress. He saw going private as a way to regain control and operate with greater autonomy.
- (Perceived) Funding Opportunity: Musk later claimed he had had a discussion with Saudi Arabia's Public Investment Fund (PIF), which he interpreted as serious interest in funding the deal, leading him to believe "funding secured" was accurate enough for a tweet.
3. Evaluation of Ethics and Alternative Approaches:
Ethical Evaluation: The decision to announce the potential going-private transaction via tweet, especially with the claim "funding secured," was highly unethical and demonstrated significant failures in corporate governance, fiduciary duty, and market integrity.
- Breach of Fiduciary Duty: Musk, as CEO and a major shareholder, owed fiduciary duties to all shareholders. His actions:
- Lacked Due Diligence: Announcing a $70+ billion transaction based on preliminary discussions without verifying funding availability was reckless. The claim "funding secured" was materially false and misleading.
- Caused Market Harm: The tweet caused extreme volatility, harming investors who bought or sold based on the false information. Small investors were particularly vulnerable.
- Failed Board Oversight: Bypassing the Board of Directors deprived shareholders of the independent oversight and due diligence the board is obligated to provide before such a monumental decision.
Sample Answer
Analytical Case Study: Tesla's 2018 "Going Private" Tweet Fiasco
Organization: Tesla, Inc. Decision: On August 7, 2018, CEO Elon Musk tweeted: "Am considering taking Tesla private at $420. Funding secured." This announcement, made without prior board approval or concrete evidence of secured funding, represented a sudden and dramatic strategic shift proposal to take the publicly traded company private.
1. Description of the Decision: Elon Musk's tweet proposed a fundamental restructuring of Tesla's ownership. Taking a company private typically involves a buyout of public shareholders by a private equity firm, management, or other investors, removing the company from public stock exchanges. Musk specifically stated a price of $420 per share (a significant premium over the then-current stock price of around $340) and claimed funding was already secured. This sent Tesla's stock soaring initially, causing massive market volatility. The decision was communicated unilaterally by Musk via Twitter, bypassing standard corporate communication channels and regulatory protocols. Within weeks, the proposal collapsed entirely as no concrete funding materialized, and Musk settled fraud charges with the SEC, resulting in significant fines, his removal as Chairman, and strict oversight of his communications.