No, Elon, You Don’t Deserve To Have Your Grade Rounded Up
Elon Musk Is Just Like My Husband’s Disgruntled Students
I finally figured out why Elon Musk’s Twitter temper tantrum sounds so familiar.
You see, I’m married to a high school math teacher and here’s a typical story I hear over dinner.
Student: Mr. Miller, why didn’t I get an A?! I got all the quadratic formula questions right!
My Husband: No, you got some right and partial credit on others. Plus, you got most of the graphing and word problems wrong.
Student: But the quadratic formula questions are more important! I should get an A!
My Husband: Go back to your desk, please.
Elon Musk, like that student, just doesn’t get it.
In early May when the S&P 500 ESG Index did its annual rebalance and Tesla was dropped from the list because of its low ESG score – Tesla is in the bottom 25% of its global industry peer group – he made the same argument as that student. “No fair!”
But let’s put what happened in perspective.
Tesla was just one of thirty-five firms that got bounced. Among the cancelled names are ones we all know, like Delta Airlines, Home Depot, and Chevron to name just a few.
Musk responded publicly via his Twitter bullhorn by calling ESG “a scam,” a claim that was echoed by some other business leaders and pundits.
How should you look at this?
My take is that Musk is proving exactly why ESG is a key part of business success and of legitimate investor interest.
ESG’s roots date back to 2006 when the United Nation’s Principles for Responsible Investment (PRI) report came out, laying the foundation for a method of judging a company’s commitment to environmental, social, and governance strategies. It was, in a sense, simply one more business risk data point among many for investors to study before committing to an investment.
Now, what Musk doesn’t seem to get (just like that student I mentioned) is that ESG is a 3-legged stool. Stable as designed, but if you knock out a leg, the whole thing comes tumbling down.
Tesla has one solid leg to stand on: the company earns a high “E” score – unjustified some say, because of concerns about the impact of millions of batteries that will need recycling in the near future. Its all-electric vehicles are so successful they’re now driving a trend towards ending our costly reliance on pumping oil from the ground and the attendant damage to the environment with cleaner electric motors.
So, Elon, you get partial credit on the ESG Environmental dimension. Why?
Because Tesla ranks 22nd on the most recent (2019) Toxic 100 Air Polluters Index compiled by the University of Massachusetts–Amherst’s Political Economy Research Institute. That’s worse than Exxon.
The two legs where Tesla’s “stool” comes apart are the Social and Governance metrics. Tesla’s scores in those areas lag far behind other automotive manufacturers. The company is dealing with frequent lawsuits and ongoing investigations about working conditions in Tesla’s factories, blatant racism in hiring and advancement, lack of a low-carbon strategy for company operations, and a governing board with little or no inclusiveness.
Few can ignore the reality that Tesla has many problems that its leadership needs to address. But rather than acknowledging the hurdles his company faces – to extend the belligerent student metaphor, rather than acknowledging that he needs to study harder – Musk chose to make it political, calling the index a scam simply because he doesn’t like the results.
So, Elon, quit complaining about your ESG “grade” and buckle down. If you don’t do the true work of a leader, don’t be surprised when your grade disappoints. The problem is your attitude, not the value of ESG metrics.
Ellen G. Frank-Miller, PhD (ellen@worcimpact.com), has spent her 30-year career collaborating with investors, employers, national advocates, and community-based organizations to help make frontline jobs better and more accessible to all. An organizational scholar by training, Dr. Frank-Miller has 15 years of experience in HR consulting and excels at creating evidence-based programs and policies. Prior to launching the Workforce & Organizational Research Center (WORC), she founded and led the Workforce Financial Stability Initiative at the Social Policy Institute at Washington University in St. Louis. She earned her PhD at the University of Chicago.
