Abstract
This paper will be an analysis of the potential ethical violations that Mr. Musk has committed, according to the theories of Individualism, Utilitarianism, Kantianism, and Virtue Theory to determine whether Mr. Musk and the company was acting ethically or unethically.
Company takeover overview
In July, at the time, security officer Peiter Zatko had accused several Twitter executives, including CEO Agrawal and certain board members, of making false or misleading statements about the privacy of its users. Because of this Mr. Musk then announced his intention to terminate the proposed acquisition, claiming in a regulatory filing that Twitter was in "material breach" of several parts of the agreement. In response, Twitter formally launched its lawsuit against Musk at the Delaware Court of Chancery and hired the law firm Wachtell, Lipton, Rosen & Katz to represent its case on July 12th. When the Board and Mr. Musk went to court on the 19th judge Kathaleen McCormick ruled that the trial would take place in early October and last for five days. In the coming weeks, many chaotic events took place, that caused the value of Twitter to fall drastically, on the 22nd Twitter cited the "chaos" caused by the proposal as the primary factor for its decline in revenue. At the end of the month, Musk's lawyers complained that Twitter had hindered them from commencing the discovery process and requested an October 17 start date, which they were given.
On August 10th Musk sold 7.92 million Tesla shares worth a total of $6.9 billion as a backup should he lose the lawsuit and be forced to buy the company. To strengthen his case Elon Musk would begin to gather evidence that suggests Twitter had manipulated the deal in bad faith. On the 29th Musk filed a "termination letter" with the SEC, citing Zatko's claims as evidence Twitter breached their contract, which was accepted into the case.
On the 13th of September Zatko testified before the Senate Judiciary Committee, while Twitter shareholders voted in favor of the acquisition. While at the same time Musk privately offered to purchase Twitter at the reduced prices of $31 billion and $39.6 billion, both of which the company rejected. On October 3rd as the time for the court hearing drew nearer Mr. Musk’s legal team informed Twitter that Musk had changed his mind and decided to move forward with his proposed acquisition at the originally agreed-upon price of $54.20 per share, on the condition that Twitter drops its lawsuit. They accepted and McCormick agreed to a request by Musk to postpone the trial to October 28 so Musk could finalize his debt financing for the acquisition. On the 27th of October, the deal was finalized. Musk immediately became Twitter's new owner, promptly firing Agrawal, chief financial officer (CFO) Ned Segal, Gadde, and general counsel Sean Edgett
Case Controversy
Because of the exorbitant expense of the Twitter Exchange, Mr. Musk began to cut costs within the company, on October 20th The Washington Post reported that Musk intended to terminate 75 percent of Twitter's staff to which Mr. Musk told Twitter employees, while layoffs were still likely to happen, he did not intend to do so at the scale the Post had previously reported. Fast-forward to November 4th Musk and Twitter began laying off a substantial portion of the company's workforce and Twitter temporarily closed its offices, with The New York Times estimating that roughly half of the employees had been let go. Because of this mass layoff without warning five Twitter employees based in San Francisco and Cambridge, Massachusetts filed a lawsuit against the company, alleging that mass layoffs would violate federal and California WARN Acts. which have yet to be addressed in a court of law. Due to the layoffs being so numerous Twitter asked some employees who had been laid off to return to the company, either because they had been fired by mistake or because they were belatedly deemed important to the health of the business. On the 16th Musk stated that he planned to appoint a new CEO to oversee Twitter eventually. Musk and his advisers met with several employees to dissuade them from leaving the company while Twitter offices were once again closed until the following Monday.
On November 18th a large number of core functions had been rendered nonviable due to resignations. These included the "payroll team, financial reporting team, and taxes team for the US, [who] completely resigned". Elon Musk calls for 'anyone' left at Twitter who can write software to meet him, or fly in, to help him 'better understand' Twitter's tech
Stakeholders
The stakeholders, in this case, are the employees at Twitter and their families. Due to the massive changes being made in their workplace they have had no assurance that they will be employed by the end of the week each day. The workforce of Twitter is directly being treated unethically. Being left without a job with no prior notice, their livelihood being put at risk as well as their families being left without a major source of income in many cases will leave people destitute.
The other stakeholders, in this case, are the users and distributors of Twitter, because of such a major slash within the company, many features that were to be rolled out with new updates to Twitter will no longer be on schedule, this will cause an eventual bottleneck within the development pipeline, that will affect all users as well as distribution companies such as Apple and Google.
Today we will take a look at this controversy through several mindsets, summarize those mindsets, and how those mindsets affect what the resolution to the controversy should be.
Individualism
Individualism according to Machan says “the only direct goal of business is to profit, and the primary obligation of the businessperson is to maximize the profit created, for the company and its shareholders.
Looking at the controversy through this lens, ElonMusk has been within the specifications of his purview, by trying to maximize profit, because the company was taken private as of October 26th we cannot tell if the profit is being increased however the plan Elon Musk would indicate he is trying to cut costs to decrease the accumulating debt, and as long as he does that within the purview of the law, he is within the ethical boundaries. That however is up to debate, the laws for layoffs are long and complex, as stated before in the case controversy section, the federal WARN law is a U.S. labor law that protects employees, their families, and communities by requiring most employers with 100 or more employees to provide 60 calendar-day advance notification of planned closings and mass layoffs of employees. Because Elon Musk had not given a 60-day notice it could be argued that he is breaching the laws, however, that could also be contradicted because § 639.9 (b) within the law states that due to unforeseeable Business circumstances the layoffs without notice could be accepted within a court case.
Utilitarianism
Utilitarianism is by far more pro-stakeholder, it takes a stakeholder’s approach by saying in order to maximize happiness in yourself and other people. Its goal is to maximize happiness for all affected parties and to minimize unhappiness for all affected parties. In other words, Utilitarianism can be described as ‘pleasure and the absence of pain’. Ultimately, Utilitarians consider the costs and benefits of actions for all affected, not just the company or one individual. If we are to consider the pros and cons for the stakeholders then the entire deal has been mishandled and has harmed every stakeholder, and the employees have been harmed by the lack of security and reassurance. With the sudden changes and creation of a precarious work environment, the surviving members of the workforce still haven’t recovered from the experience as well as the poor environment that has been put in place by the new CEO. The second stakeholders are the families of the former twitter employees and distributors of twitter. As stated before the families of former employees are directly affected by the exorbitant layoffs happening and are extremely at risk of losing their livelihood as a result, and the distributors who are seen having issues communicating with Twitter’s internal customer support (mainly because it doesn't exist anymore), the extent to which this fallout will be is unknown as of now, but it can be said that the worst is still yet to come, with Elon Musk reported being hemorrhaging money because of this deal. It is still yet unclear if the company and social media platform will declare bankruptcy and how that will also affect the stakeholders.
Kantianism
Developed by Immanuel Kant and focused primarily on rationality and Good Will. Kant says that it is wrong to manipulate and exploit people for their advantage. The four basic principles of Kantianism are defined to act rationally, helping others make rational decisions, respecting people, and to be driven by Good Will, and looking to do the right thing because it is right. In this theory, the Categorical Imperative is a test that decides whether an action is permissible or impermissible. One of the main formulations of the Categorical Imperative is The Formula of Humanity which states that it is wrong to use people as a means to get what you want because it exploits them.
If we follow this line of thinking it is clear to us that Elon Musk is in clear violation of his ethical obligation to his newly found employees, although he is acting rationally trying to cut expenses being dealt with by the company, the lack of clarity and falsities with internal reports to employees about layoffs clearly shows exploitation and manipulation of the employees, that and new reports stating that the workers who are still left are being told to do 70 plus hour work weeks show us that the new CEO, or “Cheif Twit” as he has referred to himself as is fallen out of good ethical practice for his new company.
Virtue Theory
Virtue Theory was developed by Aristotle. Virtue Theory focuses on rationality and whether a person is virtuous or not. The 4 main virtues include courage, honesty, temperance, and justice. Aristotle said that rationality is what differentiates the characteristics of people. So, people need to be rational to live a virtuous life. Aristotle also said that people need to be rational to function well and said that if a thing achieves its function then the thing is happy. Therefore, people who function well will live virtuous lives.
Looking at Mr, Musk’s actions through this lens, it becomes much harder to discern what is ethically just, on certain aspects it is clear that the takeover was very badly mishandled. As stated previously Mr. Musk has not had clarity with his employees thus making him in violation of the virtue of honesty. It is also clear that he violates the virtue of temperance.
Temperance is setting reasonable expectations for employees. Which we can see is not being followed as shown by his telling employees to work 70-plus hour weeks, with so much chaos happening around them. In happenstance, the creation of such a hostile and unreasonable work environment makes it impossible for Mr. Musk to pass the Temperance Virtue.
The virtue of justice is described not as bringing justice in the workplace but as acting in a just and reasonable manner that makes rational sense that can be followed without major issues, which again is shown to not be followed. We have seen that many of the layoffs were trying to be retracted with letters stating that people were laid off that weren’t supposed to be and Mr. Musk reportedly meeting in person with many of the former employees trying to bid favor and bring them back into the fray. The Justice virtue has been violated because of this back and forth of, giving a statement and then retracting it a day later, to where it seems there is no clear rationale for who is and isn't being put on the chopping block, the only clear thing about the whole ordeal is that people are being fired to cut costs, the employees just can never tell who.
The last virtue to discuss is courage, courage seems to not be violated solely because of the complexity of the situation. And the lack of opportunity to be violated, to violate this there would need to be a clear and established history of trust between employer and employee, but because of how recent the case is (it is still ongoing as of writing) there is no allowance for the Virtue to be violated.
Going through the 4 virtues, 3 of the 4 virtues are violated, and the 4th isn't even affected, therefore we can conclude that because any of the 4 virtues are violated Mr. Musk is not working within his ethical boundaries.
Evaluation
Now we have gone through, our journey of several different ethical theories, we can determine whether or not Mr. Musk has mishandled his newly acquired company and how he could've done better. According to Individualism, the argument could be made that he was within his purview of the law to cut ties with a large portion of the workforce without prior notice thanks to § 639.9 (b) of the WARN Acts. but according to all other views he has been in a clear and direct violation of his ethical responsibility to his employees and their families. Utilitarianism would argue that because of the lack of morality with judgments that have taken place, its core values of maximizing happiness haven't been followed. Kantians would also agree that the ethical boundary has been crossed stating the Categorical Imperative was not followed. It is also stated by Virtue theory, that because 3 of the 4 virtues; honesty, temperance, and justice, were not followed that Mr. Musk wronged those who were let go.
Unfortunately, hindsight is 20/20, and what has happened can't be fixed. The correct path to have taken would have been to give the employees 60 days' notice and begin to cut costs in other ways while the layoffs were to occur. The question then arises, “How would we rectify the situation now ?” The most obvious answer would be to give a stipend for the influx of money that has been lost as a result of the layoffs. The odds of that happening are slim to none, however. The option that then brings itself to the forefront would be to settle this dispute in a class action lawsuit that would be able to allow an accord to the workers so that they may air grievances and work toward a settlement that is beneficial to their issues.
Closing Thoughts
In my closing thoughts, I feel I should also come to say that even though this writing is in an attempt to stay neutral to the situation, I do feel that my own thoughts will seep into the writing of the paper. I do stand with the workers as I feel everyone should in this situation. However, there is an argument to be made that this was the course of action that was going to be made regardless of ethical boundaries. I should note that the situation was poorly handled at best and that even if layoffs were to happen the WARN Acts should have been followed better and the workers should have been given much more clarity on what was to happen when the transition between the two different boards was going to happen. I also feel that the Board of directors spearheaded by the former CEO Parag Agrawal is not innocent in the events that lead up to the mass layoffs, in many ways they sold out their employees and left them with many questions and concerns without instilling confidence or a sense of security, it is just as much the board's job to ensure employees that they have security, as it is the board's job to please shareholders.
References
“Code of Federal Regulations; PART 639 - WORKER ADJUSTMENT AND RETRAINING NOTIFICATION.” www.govinfo.gov, 1 Apr. 2010, https://www.govinfo.gov/content/pkg/CFR-2010-title20-vol3/xml/CFR-2010-title20-vol3-part639.xml.
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