The standards for the personal conduct of corporate board members will likely become become a topic of discussion for many companies this year now that the Wall Street Journal reported that some executives and corporate directors have expressed concern about Tesla CEO Elon Musk’s alleged drug use. After smoking marijuana publicly with popular podcaster Joe Rogan in 2018, Musk continued to run Tesla and SpaceX with little vocal criticism.
However, shortly after, he did consent to random drug testing for himself and SpaceX employees since government contractors are required to have drug-free workplaces. While Musk claims he did not test positive for illegal drugs during three years of random drug testing mandated by NASA, Wall Street Journal reporting that has been picked up by other news outlets, found that a number of executives have speculated that some of Musk’s erratic behavior and controversial public comments may have occurred while he was under the influence of drugs.
The attention this story has generated across the media landscape is an indication of the impact the personal conduct of a company’s CEO and board members can have on a company’s future. Musk has not been found guilty of anything except taking a puff of marijuana with Rogan, but just the idea that he could be doing more has many people alarmed. Personal conduct matters. Poor personal conduct could cause reputational damage to a company and even have an impact on its share price in the short term.
Questions of Ethics
The possibility of a CEO or corporate board members using or abusing illegal substances and/or prescription drugs presents several interesting questions for directors to consider:
• Does the company code of conduct include a policy on drug use that must be implemented for all employees and executives?
• Once illegal drug use or prescription drug abuse is discovered, is it a personal matter that the individual should be allowed to seek treatment privately or, is it material information that should be disclosed to investors no matter what?
• In states where marijuana use is legalized, should companies prohibit all employees from using it?
• Has the board considered the legal liability for failing to monitor drug use among its employees and executives? What can be done to mitigate this risk?
• Has the board reached out to ask its largest shareholders how they feel about all different forms of personal conduct, including drug use?
• Has the board discussed what it might do if it were in the same situation that the Tesla and SpaceX boards now find themselves? What would your board do if the CEO or a corporate director were found to be using illegal substances?
The personal conduct of company top executives may need to be revisited by corporate boards this year for many reasons, including a review of how a company should view drug use in light of society’s changing views on marijuana. Boards need to have a firm policy on personal conduct before a crisis occurs.
