Social Media Risks Every Business Owner Should Know

William F. Mueller, Attorney at Kelley Kronenberg

What are a CEO’s words worth? In Elon Musk’s case, they are getting costlier almost daily.  On August 7, 2018, one of America’s greatest innovators tweeted, “Am considering taking Tesla private at $420.  Funding secured.” Through a settlement agreement with the SEC, that tweet cost Musk and Tesla $40 million, about $4.4 million per word, and required Tesla to supervise and approve Musk’s communications.

The SEC is now looking to hold Elon Musk’s feet to the fire for that settlement agreement. The agreement, which was made on October 16, 2018, specifically required Musk to seek pre-approval for any written communications, including social media posts, that contained material information affecting Tesla’s shareholders.  Fast forward to February 19, 2019, this time he tweeted inaccurate production numbers without pre-approval. As a result, the SEC is seeking a court order for Musk to show cause as to why he should not be held in contempt for violating the previous agreement.  It seems that managing an iconic CEO is a tough job for Tesla’s Board of Directors.

What companies over the world are seeing in writ large at Tesla is also being experienced at the local business level.  There is a trend occurring that company owners don’t appreciate or want — employees are engaging in vitriolic exchanges or making overtly political statements on their personal social media pages. Do these social media posts affect the businesses these employees work for? Do the employees have Constitutional protection to express those personal thoughts publicly?

Whenever a person’s speech is curtailed, most Americans think of the First Amendment’s protection of speech. However, the First Amendment protects citizens from the government, not private parties.  Private sector employers are not restricted the same ways federal and state government employers are. That is not to say private employers can quash any speech from their employees.  They can’t.  Federal legislation, specifically, the National Labor Relations Act, protects employee conversations about the conditions of their employment — think benefits, the conditions of their work environments, and salary.  Does this law protect employees from posting inane comments about their frustrations on political matters or exasperating moments with customers or clients?

A vast majority of employees (some estimates are in excess of 75%) access social media at their place of employment from their work computers. At that rate, it makes sense for employers to dig into the law and find out specifically which matters can and cannot be disciplined. The question that naturally develops is this – should company owners care? Of course they should.  Most sensible owners do not want customers or clients to form opinions or make decisions based on what could be perceived as over-heated and/or half-baked political arguments.  Instead, they would prefer decisions to be made based on the quality of their products and services.

There is another dimension to Musk’s tweets that make me wonder about his demonstrated resistance to the SEC. As an attorney, I am a professional skeptic. Musk is brilliant, and I need to ask — what is so hard about playing nice with the government, especially after executing a very public agreement saying you would play nice? Answer — you want the SEC to do something overreaching so you can blame them.  In other words, it’s not death by social media, but instead being rescued through social media by baiting the SEC into overreaching, then shifting blame to the government for interfering with your brilliance. Would employees do something similar — bait management into some sort of overreaching reaction to inappropriate social media posts, all because they don’t like the people in charge?

It should be common sense for everyone, from CEOs to employees, to think about what they are posting on social media and how those posts can affect their companies.  Truth is, common sense is great, but isn’t always so “common.” Social media posts can land an employee in trouble with their company’s leadership, or worse, precipitate a reaction from government authorities.  One simple thing businesses can do is outline and educate employees about their social media expectations and policies.  If the company doesn’t have a policy, put one together. That way, unlike Tesla, the focus remains on building a superior product, not dealing with litigation while the world watching.


About the Author: William (Bill) F. Mueller is an Attorney in the firm’s Fort Lauderdale office where he leads Kelley Kronenberg’s Management Consulting Practice. Bill has been a leader in restructuring and transforming numerous large and mid-size companies. He has extensive experience in the design and execution of large-scale transformation programs, including target setting, operating-model redesign, profit-and-loss improvement, performance management, as well as governance, culture, and change management. He can be reached at wmueller@kklaw.com.

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