Elon Musk, Martin Sorrell and how a CEO can drive perceptions of a business

by George Hartrey
by George Hartrey

Following an unscrupulous war of words with a British cave diver, Elon Musk is now being sued for libel. A fortnight ago he was seen smoking marijuana on popular internet podcast The Joe Rogan Experience – the following day Tesla, Inc. fell six per cent on the Nasdaq Stock Market.

Musk is quite unlike anything we’ve ever seen before – he is a true celebrity CEO. He is a tech titan at the top of several billion-dollar enterprises, but his personal reputation has outgrown that of being a CEO of an electric automotive company. He’s shed the ‘Tesla guy’ moniker and developed his own brand, but has it damaged his business at all?

In comparison, earlier this year we saw the demise of WPP’s Sir Martin Sorrell, the world’s largest advertising agency, after internal investigation into claims of personal misconduct. At the time, he was the longest serving CEO of a FTSE 100 company, and the highest paid.

He rejects the allegations of financial wrongdoing, but he wasn’t able to survive the damage done to his reputation and the company announced his departure would be treated as a retirement. He left having turned a small wire and plastics company into an advertising agency that served 112 countries over the course of 33 years.

In the months leading up to Sorrell’s exit, share prices fell gradually from their highest point of the year, £14.71 in February, down to £10.90 towards the end of March. Shareholders lost patience with the CEO leading up to his exit, and prices were back up to £13.60 by the time May came around.

The question is, how long are investors willing to put up with Musk and his eccentric public approach? Shareholders became disgruntled with the South African last month when he announced on Twitter that “funding [was] secured” to take Tesla private, causing share prices to rocket before plans were scrapped. The US Department of Justice have since asked the firm for documents of proof that privatisation was on the cards.

But share prices have been rocky for a while at Tesla. A six per cent crash the day after he was seen smoking marijuana and sipping whisky during the podcast recording would indicate his outward approach has a huge impact on the company, but it doesn’t tell the whole story.

His online antics took place the same day two senior officials quit the trailblazing car manufacturer – chief account officer Dave Morton quit after a month in the job, and chief people officer Gaby Toledano announced she would not be returning from a period of extended leave.

Consumer sales, however, indicate that Tesla are going strong – their year-to-date sales have already surpassed 55,000, beating the Nissan’s previous record of electric vehicles sold in one year of 30,200. In August alone, they sold 18,000 Model 3s, which came after Musk’s remarkable Twitter tirade against Vernon Unsworth, the man behind the libel case against him.

There are positives to Musk’s persona. His ‘mad scientist’ image puts personality behind his ventures – he’s top of the hierarchy at a number of successful companies, and he deals with government, investors and the average consumer alike. It’s a complex personal brand but one that seems to be paying dividends for the company.

To be a public-facing CEO is a fine line to tread. Get it wrong and shareholders, staff and customers will call it quits, and either you’ll leave, or they will. Do it right, however, and it has the potential to be a winning business model. Musk is as out-there as they get, but his recent headline-grabbing actions are under intense scrutiny, and while his personal brand has been set apart from his enterprises, it may not be long until they start bearing the brunt.