Fraud risks related to Tesla’s culture, leadership, and governance structure
The tone at the top of Tesla, Inc., formerly known as Tesla Motors, is that which rewards innovation and risk-taking. Although it’s essential for the achievement of the company, the dark side of this tone at the top is that it produces a grueling working atmosphere which can promote the kind of 'whatever it takes' mentality that is often associated with fraud (KPMG, 2013). Although Tesla's CEO, Elon Musk, described as the “real-life Iron Man”, has many admirable characteristics of management, his charisma and challenging style of management could generate danger of fraud for Tesla. Mr. Musk’s ego and self-actualization could enable him to rationalize “ cooking the books” to safeguard his legacy and attain his ambitious goals for the company. Employee-related fraud may increase as employees may feel pressured to follow questionable directives coming from their CEO as they fear his wrath or feel uncomfortable speaking against him. Additionally, Mr. Musk’s charismatic personality may cause employees to rationalize fraud as needed in order to help him realize his noble vision.
The culture is highly risky but this comes with rewards. The employees work for long hours though with good pay. This kind of environment may push workers towards being fraudulent in their daily activities. More of these leaders at the top make millions from the company by selling shares and also retiring and going on leaves this may be used to conceal fraudulent actions. Lastly, the company's announcement that it would not lawsuits against anyone who in good faith wants to use its technology may lure employees to become fraudulent as there are no repercussions for that.
The company culture at Tesla seems to include long hours, hard work, high achievements, and high innovation. According to the case study, Tesla’s culture revolves around “high risk, high reward”. Employees work very long and hard in order to bring Elon’s bold ideas to life. Tesla is known to have a high reputation due to the large amount of money the company makes and the innovations they have. Tesla’s culture creates pressures for fraud due to the company’s reputation. Employees may commit fraud so that they can keep their job, or so that they can receive more money due to Tesla’s performance.
Tesla Motors is a highly innovative firm with creative staff who work for considerable time lengths. The team at Tesla aims to realize the high goals that are set. Therefore, this description is a subtle description of the culture of the organization. The presented case study presents the firm as a high-risk taker from which it derives high proceedings. The hardworking staff strives to ensure that the objectives and goals set are achieved. The culture creates a very high reputation for the organization thus creating pressure as well as a rationalization for fraud. The staff is likely to engage in fraud cases to secure their employment and receive recognition for their achievement. Lastly, the announcement made by the company to allow any person permission to use its technology might lure the staff to engage in fraud cases as no action will be taken against them
While fraud is defined by the Public Company Accounting Oversight Board (PCAOB, 2016) as an intentional material misstatement of financial reports, it is difficult to tell an honest mistake from a fraudulent attempt from such a high-pressure work environment as created by Tesla.
With reference to the triangle of fraud causation, this environment holds all the hallmarks of a breeding ground for fraud. Further, the heightened need by Tesla employees to achieve, as is the desire to get the huge rewards on offer from the company as a reward for good performance means that even the most ethical of employees could be tempted into engaging in fraudulent activities.