Illustration: Jayachandran/Mint
Illustration: Jayachandran/Mint

When business leaders behave badly

The humbling of Elon Musk shows that markets and public opinion can be effective in holding them to account

I can hire one half of the working class to kill the other half," Jay Gould had once said. It wouldn’t have been past him to try. Little was off limits to the man who played Wall Street like a fiddle, captured the railroad industry and nearly cornered the US gold market in 1869’s Black Friday panic. Even by the standards of the Gilded Age, the robber baron, described by a newspaper as a “wrecker of industries and an impoverisher of men", was extraordinarily devious and despised. It didn’t stop him from amassing a fortune that places him eighth on an inflation-adjusted list of the US’ wealthiest men.

Elon Musk would likely give a great deal for such immunity to public opinion right now. The Tesla co-founder’s latest Twitter meltdown was roundly and promptly punished by the market. Within a day of his calling Vernon Unsworth a “pedo" on social media —Unsworth, who had taken part in the cave rescue operations in Thailand, had the temerity to dismiss Musk’s public offer of help as an attention-seeking stunt—Tesla’s market value had tanked 3.5%. By Wednesday, Musk had been forced to issue an apology.

A 72-hour turnaround from belligerence to contrition from a man as prickly as Musk is enough to give one whiplash. The last time he had lashed out at sceptics on an earnings call in May, after all, he had doubled down despite the market reacting poorly to his tantrum. Is he finally learning? More intriguingly, are public sentiment and the market finally starting to punish high-flying business leaders for bad behaviour?

It isn’t just Musk. Negative market sentiments claimed Uber co-founder Travis Kalanick’s scalp last year. According to some analysts, the deluge of stories about the sexism, and unethical and abrasive behaviour enabled by—and in some cases, allegedly instigated by—Kalanick and his leadership team cost Uber tens of billions of dollars in market value.

The “tech bro" culture prevalent in many start-ups is infamous for being a hothouse of such transgressions, but the masters of the universe on Wall Street pioneered them. Times are changing there too. Last year, Fidelity Investments was rocked by a scandal involving Gavin Baker, one of its star portfolio managers, who allegedly sexually harassed a female employee. Baker’s firing triggered an exodus of other portfolio managers for allegedly inappropriate behaviour. As the Financial Times reported, investors are taking note. Calpers, the largest US public pension fund with $355 billion in assets, is taking a hard line in rooting out and doing due diligence about harassment cases. So is the $56-billion Los Angeles County Employees Retirement Association.

Such reckonings are long overdue. The old canard that a business leader must be a tyrant and a bully to succeed and drive those around him to succeed is long past its sell-by date. Any number of businessmen—look closer to home for a bushelful in India’s tech sector—show that being level-headed is no impediment to success. The true motives are more likely to lie at the uncomfortable intersection of ego, impunity and public adulation. If the latter two legs of that support structure crumble, the edifice tumbles down. Continuing as before then has financial consequences—among them, intrusive regulation costing time and money if companies show themselves incapable of self-regulation.

Why now? Social media likely has something to do with it. It can bring out the worst in the public by enabling risk-free mob mentality and witch hunts. But by the same token, it can allow the public to directly punish businesses and business leaders for actions it disagrees with in a manner that simply wasn’t possible before. Witness Uber’s bowing to the #DeleteUber social media campaign last year. Part of it is to do with the #MeToo movement. Sexual harassment is one of the largest issues when it comes to unacceptable behaviour in companies. A concerted pushback by women has been a long while coming. And now that it is here, it has shown, so far at least, that it has legs. Businesses are running scared at the possibility of legal entanglements and public shaming—as they should be.

Now, the inevitable caveat: These are baby steps. Success obscures much. This is a reality that would be foolish to ignore. Would Musk’s tantrums have caused such a backlash if he hadn’t been left vulnerable by Tesla’s earnings losses and production problems? It is unlikely. Or take Amazon founder and the world’s richest man, Jeff Bezos. He is infamous for the manner in which he bullies subordinates. His “nutters"—bouts of brutality to his employees—while a far less grave sin than sexual harassment, would still have put an end to the career of a less successful man. Steve Jobs, meanwhile, could have given him a pointer or two on terrorizing employees. But seven years after his death, the tech auteur’s famed reality distortion field continues to hold.

The arc of history may bend towards justice, but it also bends towards profit. The trick is to nudge it towards the former without derailing the latter. That is something public opinion is better suited to achieving than regulation.

Can public opinion stop business leaders from behaving badly? Tell us at views@livemint.com

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