The Elon Effect
Corporate Reputation03 Feb, 2023
You know his name, you know his net worth, but do you know what effect he’s having on reputation? Elon Musk has been in the tech game for over twenty years and his skyrocketing celebrity status (pun intended) has made him one of the most public moguls of our time. However, fame alone isn’t the key to a shining reputation, and Elon’s actions are impacting how stakeholders view his enterprises.
Our 2022 Tech Report called attention to the fact that the industry has some of the most recognizable leaders and CEOs who are known for both their eccentric personalities and eccentric wealth. The data in this report highlighted the disparate divides between employees and their leaders that may be causing a distinct rub in workplace sentiment. We decided to investigate the matter further to see what “Elon effect” has manifested across two of the leader’s most notable companies: Tesla and Twitter.
STEP ASIDE, DOC BROWN
Whether or not you drive one, you’re probably familiar with the Tesla brand. Tesla, Inc. is an automotive and clean energy company known for its “Back to the Future” styled electric vehicles (no plutonium required).
While not a time-traveling DeLorean, Tesla has been breaking ground in the automotive industry since its inception in 2003. Musk has been leading the company since 2008 and as of 2019 is the longest-tenured CEO of any automotive manufacturer globally. That’s a significant amount of time to build a strong reputation, so how does it stand now?
In 2022, Tesla had an average Reputation score of 67.7—down 4.1 points from 2021. For a company that’s founding principle includes clean energy, Tesla had a slightly higher overall ESG score in 2022 and moved into the Strong range when looking at the “Environmental” factor alone.
In late May of 2022, Musk publicly declared: “ESG is a scam. It has been weaponized by phony social justice warriors.” And in a sure-fire manner, we saw Tesla’s ESG scores decline shortly after.
In addition to Reputation and ESG, the RepTrak model includes scores on the 7 Drivers of Reputation—which offer tangible rationale for why people think a certain way about a company. One such Driver is Leadership. This score is comprised of Driver Factors that consider the effectiveness of how a company is managed. Does it have an appealing leader? Is its vision and mission clear? Is it well organized?
All of Tesla’s Drivers saw significant decreases from the previous year. When we isolate the Leadership Driver, while still a Strong score, we saw the same timely decrease after Elon’s ESG comments were made.
ESG isn’t something to be ignored in this day and age (see our Ultimate ESG Guide for more), stakeholders want to know that company leaders take these concerns seriously.
HE’S STOCKING UP
These ESG comments aren’t surprising coming from a figure like Musk. For years he has been a polarizing figure with controversial views on politics, technology, and notably, freedom of speech. Despite growing calls for more regulation of social media platforms and their spread of misinformation, Elon was ready to jump in and “protect” the nature of one such platform: Twitter.
A year ago, Musk started buying large shares of the publicly traded (at the time) company which led to his eventual place on the board of directors by April of 2022. From April through October, Musk was in back-and-forth dealings with Twitter after offering to buy the platform—then reversing the offer. During these months both Twitter and Tesla’s stock prices dropped, and our RepTrak data can see how severe the impact was.
Those 7 Drivers we mentioned drive our Business Outcomes—the actions stakeholders are willing to take when considering, supporting, and engaging with a company. When we look at our Invest Outcome, we see a correlation in Tesla and Twitter’s stock decline with the unsettling dealings of Elon.
On October 27, 2022, Musk officially acquired Twitter and immediately assumed the CEO role, ousting the former leader, Parag Agrawal, along with several other top executives.
Twitter didn't have a shining reputation before Elon took over, but we see a distinct decline across their scores that correspond with his start date.
It’s estimated that nearly half of Twitter’s work force was let go, but even before the firings, some folks took to their own devices and left the company by choice. Interestingly, though Twitter had employees willingly leave the company after Musk’s arrival, it’s Tesla’s Work For Outcome that suffered a larger decrease at the end of 2022.
Layoffs are a scary prospect for any employee, especially looking at the harsh economic climate of the new year. Remember that employees are the backbone of any given company, and you need them as much as they need you in rough conditions.
UNDER ONE ROOF
When Elon took over Twitter, their Reputation Score declined—and so did Tesla’s. Regardless of the difference in product, Twitter and Tesla faced similar reputational repercussions as a result of their same leader.
Matthew McCarthy, a Senior Associate in Advisory here at RepTrak, offered some insight on this “Elon Effect:”
Ready to be a leader in reputation?
Being a great leader is no easy feat. And looking toward the tightening economic status of 2023, effective leadership cannot be overlooked when the public is carefully evaluating where they choose to spend their time and money. Make sure that you’re clearly communicating your efforts, both internally and externally. Your employees are stakeholders too, and they won’t hesitate to share their frustrations.
But don’t worry, we see you’re already climbing up that reputation ladder of leadership! Our reputation database combines and analyzes millions of perception and sentiment data points from online surveys, media, and third-party sources, so you can confidently compare and understand how your leadership style is stacking up in the public eye.
Be the leader your stakeholders want to see, visit reptrak.com to schedule your demo today.