The importance of social media for a business entity is becoming a critical part of how a corporation markets and connects with its consumers. With much of America’s citizens joining and using social media sites regularly, the social media industry is becoming a larger part of our lives. In fact, over 2 million corporations are using Facebook for promoting their products and services. Corporations have found that the use of social media allows for it to lower ad costs, reach its target audience, and analyze the effectiveness of its ad campaign. Though 61% of Fortune 500 CEOs have no presence on social media at all, there is a smaller subset of CEOs that are using their private accounts to build a brand for themselves and their companies. This has to lead to free PR for their company, with one such example being T-Mobile’s CEO John Legere.
But what happens when the CEO goes too far and crimples the business?
This is exactly what happened to Telsa. Its CEO, Elon Musk, has become a celebrity on Twitter with over 22 million followers. Musk has become one of the most influential CEOs on the platform. Musk has used the platform to display his self-expression and is often guilty of oversharing. An example of his oversharing was displayed in the following tweet:
His tweet about taking the company private and having funding secured triggered the SEC to investigate his claims. The SEC was worried that his tweets might lead to market manipulation. In fact, the stocks soared by 11 percent. A week after the tweets, the SEC subpoena-ing Telsa about Musk’s statements. The SEC found that Musk nor Telsa had lined up the necessary financing aside from preliminary talks with investors. The Board of Telsa has requested for Musk to leave twitter during the investigation.
The SEC Deal
The SEC sued Musk for his statements of taking the company private. The SEC found that his statements about securing the funding to offer shareholders $420 per share, misleading. The SEC and Telsa settled the lawsuit for $40 million and required for Musk to step down from his chairman position. This marks the first time the SEC has reacted to social media post and online communications and is likely to not be its last.