STRATEGIC PURPOSE: ETHICS & CORPORATE SOCIAL RESPONSIBILITY (CSR)
The effectiveness of CSR strategies implemented by organizations determine—to some extent—how well they address some of the major issues affecting stakeholder value in the business ecosystem (Kolk, 2016). In the automotive and energy industries, CSR solutions as explained in Archie B. Carroll’s model (Peloza & Shang, 2011), have direct impact on stakeholders and businesses. Here are some CSR programs and initiatives implemented by Tesla:
- Employee Health and Safety
Tesla requires its production employees to take part in a multi-day training program before resuming duties at any of its facilities. The automaker also provides zero-cost healthcare benefits and other safety bonuses to all full-time staff. The media applauds Musk for implementing the “Find It-Fix it” program which has consistently improved employee performance. Tesla increased employee engagements from 3,000 in 2017 to almost 23,000 in 2019 due to its highly effective health and safety policy.
- Gender Equality and Minority Groups
In 2019, Forbes recognized Tesla as The Best Employer for Diversity. However, there are concerns on issues related to gender inequality and discrimination against some populations (Gast et al, 2017), but the automaker is making efforts to ensure a fair representation of traditionally minority groups/communities among its workforce as illustrated in Figure 1 below:
Figure 4: Representation of Minority Groups at Tesla U.S.
Source: Tesla Impact Report (2019)
As shown in Figure 1, traditionally underrepresented groups across Tesla facilities within the United States amount to an approximated 60% majority, out of which Blacks and other additional groups have the lowest power. Minority groups are also affected by unfair eligibility standards for the positions of Director and Vice President at Tesla U.S. as illustrated in Figure 2 below:
Figure 5: Underestimated Gender Groups at Tesla U.S.
Source: Tesla Impact Report (2019)
Tesla 2019 report shows that Americans (Whites) have an overwhelming majority votes in leadership positions. Gender representation at Tesla U.S. is also very low. Only 21% of employees are female, out of which a meagre 17% hold positions of authority. Despite the identified weakness, Tesla’s CSR strategy considers employees as a crucial part of the success story (Okpara & Idowu, 2013). Therefore, in designing CSR approaches to improve its automotive and energy solutions business through employee engagement, the company implements performance-based reward systems that influence business productivity (Ditlev-Simonsen & Wenstop, 2013; Crane & Matten, 2016).
- Recycling
Tesla recycled large volumes of Cobalt (110 tons), Copper (320 tons), and Nickel (1,000 tons) in 2019. Evidence-based research conducted by Tesla shows that vehicles fitted with internal combustion engine (ICE)—that is automobiles that consume petrol/gasoline—emit about 69 tons of CO2 during their lifetime. To limit the hazardous effect of carbon emissions on humans and the environment, Tesla EVs are designed to run entirely on electricity during their lifetime thereby producing very small fraction of these. Tesla Model 3 Standard Range Plus (SR+) is the most energy-efficient electric vehicle on the global automobile market (Tesla, 2020; Pohl & Tolhurst, 2010)
Figure 6: Top 10 Electric Vehicles Globally (2019)
Source: Clean Technica/EV Volumes (2020)
Ethical Aspects of Tesla’s Business
Bribery and Corruption
Tesla’s buyout of SolarCity in 2016 was fraudulent because Elon Musk knew of SolarCity’s financial challenges before the acquisition. He also played major roles in the buyout, which was—in fact—a rescue mission for his relatives (cousins) Peter and Lyndon Rive. For example, in the CEO’s desperation to achieve his SolarCity goals, he allegedly gained shareholder support for the takeover by unveiling Tesla’s Solar Roof project in October 2016. But the Solar Roof tiles were later discovered to be fake. The author suggests that Tesla should adapt a zero-tolerance policy to bribery and corruption in order to achieve sustainable growth based on the principles of ethics and CSR.
Bad corporate governance
One of Musk’s biggest achievements at Tesla is co-founding SolarCity, a corporation he chaired and was its largest stockholder before the stock-for-stock agreement with Tesla. The problem is that Tesla leaders failed to create a special committee and time to deliberate on the possible acquisition of SolarCity—notwithstanding protests from some of the directors. This implies that Musk has an overwhelming influence on a large number of Tesla directors who cannot gamble with the personal and business relationships Musk share with SolarCity owners. Therefore, SolarCity acquisition was flawed with a conflict of interest, which indicates that companies entering transactions with significant, influential stockholders—such as Tesla and Elon Musk—may not be able to rely on a stockholder vote to attain dismissal of transaction-related litigation. In reference to the stakeholder theory of CSR, this is a high-risk area for potential Tesla partners, thus, Tesla board has should limit Musk’s excesses with robust constitutional checks and balances and an organizational culture built around moral and ethical principles.
Poor PR management
In September 2018, SEC charged Musk with securities fraud for his “false and misleading” statements about Tesla going public. Tesla was also party to the lawsuit for not having adequate controls and procedures on the CEO’s use of PR channels (i.e. media platforms). The cost implication of poor PR management underscores the importance of ethical principles in organizations (Chasan et al, 2018; Gelles et al, 2018). But despite his leadership weakness, Musk is a visionary leader whose ideas are rebuilding the world. However, Tesla’s board needs to exert more control on the CEO in order to reduce/eliminate risks that might arise from miscalculated use of words (Ted & Daniel, 2019).
Self-driving cars
Tesla has become an incredible “robotaxi” company by producing self-driving taxis. This investment model is justifiable. But there are challenges associated with self-driving robotaxis. For example, robotaxi users may exploit the fact that there is no driver, and not be responsible passengers. Moreover, the use of interior cameras and other internet-based monitoring systems may encroach on users’ privacy. Tesla’s robotaxi systems therefore create trust issues (between owners and customers) that require strict adherence to the principles of ethics and CSR in business.
Conclusion
As environmental issues are gaining global attention, Tesla has huge potentials for more groundbreaking achievements if it maintains focus on alliances, ethics and CSR, and constant use of advanced technology.
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Self-Evaluation for Undertaking the Research
Having completed this task on ‘Global Strategy and Sustainability,’ and specifically the American auto brand Tesla, I now understand how the organization started as a luxury car niche differentiator and eventually achieved global competitiveness through a broad differentiation strategy. The module also offered theoretical and practical knowledge of how organizations can maximize transformational leadership, corporate culture, innovation, alliances, CSR, and other effective global business strategies to gain strong market visibility within and across international boundaries. I am therefore excited for the opportunity to successfully analyse Tesla’s business environment, with clear understanding of buisiness management concepts such as sustainability, competitive advantage, vertical/horizontal integration, outsourcing, licensing, business ethics—as well as the analytical framework, PESTEL In the area of marketing, Tesla’s rapid ascension and domination of the auto industry also broadened my perception of the relevance of strategic marketing, automation, supplier relations, R&D, and product differentiation.
My greatest challenge in completing this task was the dearth of robust academic resources on Tesla’s business model. Additionally, conducting a comparative analysis of Tesla’s competitors without a well-organized, valid and verifiable data implies there could be marginal errors in some statements and facts provided in this paper.
One of my greatest strengths is showing an exemplary attitude at all times. I am self-driven and also willing to go the extra mile to put others at ease, thus, fostering a comfortable and open work atmosphere. Therefore, the leadership lessons learned from Musk’s personality, erratic behaviour, and role in SolarCity acquisition, and more importantly, Tesla’s commitment to creating an environmentally sustainable world, are a source of motivation that will certainly increase my commitment to good corporate governance as well as widen my chances of achieving success as a global leader. Also, knowledge of how effective HR and TQM tactics can provide organizations with competitive advantage adds to my fulfiLlment as a research student. Therefore, I look forward to acquiring more skills/knowledge that will enhance my use of innovative management strategies and corporate culture to foresee problems/opportunities, enlarge capacity, improve customer relations/satisfaction, and strengthen employee relations towards attaining the goals of my organization—and to an extent, accelerating global transition to sustainable energy.
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