Essay Sample on Tesla Company: Improper Financial Reporting & Privatization Attempts

Introduction

Tesla is a company based in the United States that designs, develops, and sells electric vehicles and energy storage systems (Urban, 2015). Further, it installs, controls, and maintains energy and solar storage devices. The improper financial reporting that Tesla Company experienced was majorly propagated by the management. Precisely, on August 7th, the company's chief executive officer, Mr. Elon Musk tweeted that he was considering privatizing Tesla at the cost of $420 and that the funding was already secured (NBC News, 2018). The tweet brought many controversies among investors and company stakeholders. Mr. Elon Musk also faced a possible fine of $20 million and removal from his position once the case is determined (NBC News, 2018).

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The financial reporting especially the tweet spiked Tesla's stock price and created immediate value for investors. Consequently, it caused chaos that harmed the company's shareholders harm. Musk's tweet conveyed the concept that he was trying to manipulate the market share price of the company. Further, it made it appear that the company had already received the funds and that the price was already confirmed. This caused a trading frenzy and made the stock price to increase by 6% (NBC, 2018). The increase forced NASDAQ to stop trading with Tesla until the company responded officially to the tweet. Further, the stoppage compelled the investors to re-strategize and re-calculate their investments with the company. Lastly, the financial reporting especially the rise in the stock prices chased away potential investors who were planning to invest in the company.

An ethical climate of a company improves employees' honesty and enriches its commitment to integrity (Rakoto, 2015). Principally, a proper ethical corporate culture leads to accurate and honest financial report thereby eliminating problems such as inappropriate tweets from management such as the one from Elon Musk. Reports have indicated that promoting fair and ethical values including honesty and integrity would lead to proper financial reporting (Rakoto, 2015). In particular, it will enable the chief executive officer to release accurate and verifiable statements thus improving the confidence of existing and potential investors, as well as, other stakeholders. In return, this will create a harmonious working environment in Tesla and eliminate confusion and incorrect financial statements and records that may influence the entire organization.

References

Urban, T. (2015, November 17). Elon Musk: The World's Raddest Man - Wait But Why. Retrieved April 24, 2019, from https://waitbutwhy.com/2015/05/elon-musk-the-worlds-raddest-man.html

NBC News. (2018, October 1). Elon Musk agrees to pay $20 million fine in SEC settlement. Retrieved April 24, 2019, from https://www.msn.com/en-ca/video/wonder/elon-musk-agrees-to-pay-dollar20-million-fine-in-sec-settlement/vi-BBNOwVp

Rakoto, P. (2015). Financial Reporting Quality, Executive Stock Options, and Business Ethics. GSTF Journal on Business Review (GBR), 4(2), 21-30. doi:10.7603/s40706-015-0024-3