More Compliance Lessons From Elon

Elon Musk is the gift that keeps on giving, providing one example after another of how an executive can blunder forward without considering — or maybe just ignoring, who really knows — the ethics and compliance implications of his or her decisions. What lesson does the chief twit offer now? Read on.

The immediate news is that by the end of this week, Twitter expects to launch a new and improved verification service. This would be a successor to the original verification effort that the company launched three weeks ago and then promptly killed, as droves of people used the service to create fake accounts and then flood Twitter with fake tweets.

Musk hasn’t yet said whether individual users will need to pay for verification this time around, but his ultimate ambitions are already clear: Musk wants a much larger share of Twitter’s revenue to come from subscriptions. That is a huge shift in Twitter’s business model, with huge shifts in Twitter’s ethics and compliance concerns following close behind. 

First let’s look at the numbers. Twitter reported $5.08 billion in revenue for 2021. Of that amount, more than 90 percent came from advertising; subscription revenues were so small that Twitter never even bothered reporting them as a separate line item. Now Musk wants half of Twitter’s revenue to come from subscriptions. That’s at least $2.5 billion a year and potentially much more, if Twitter somehow hits the lofty revenue goals Musk has mentioned.

Think about what that shift really means: that Twitter is selling something new. 

That is, when Twitter made its money through advertising, the company was selling its user base to big corporate advertisers. To make money through subscriptions, however, Twitter must sell the right to use Twitter to individual users — and Musk needs so, so many users, so he can meet his debt payments. 

From that perspective, it’s no surprise that Musk is now rescinding bans on users previously suspended for hate speech, abuse, and misinformation. Why wouldn’t he? Musk needs as many people as possible to pay subscription fees. You can’t expect people to pay those fees and then tolerate their account being suspended, or accept that some of their favorite voices on Twitter are suspended. People paying to use Twitter expect to use Twitter, period. 

Compliance professionals can see the knotty ethics and compliance questions that arise from all this. What legal obligations does Twitter have to police disinformation and hate speech — here in the United States, in Europe, or in any other jurisdiction where Twitter exists? What ethical obligations does it have to restrict the dissemination of hate speech and lies that might harm innocent parties? (Musk, naturally, is trying to automate those answers with AI. Curious to see how it goes.) How will employees, consumers, advertisers, and others respond to the company’s answers?

And We’re Back to Governance

The lesson here for corporate compliance officers is how poor corporate governance can allow a CEO to plunge forward with sudden, jarring changes in strategy; ethics and compliance consequences be damned. That can leave compliance officers and other corporate gatekeepers in a terrible position as you follow behind, cleaning up the mess the CEO made. No wonder Twitter’s chief compliance officer and numerous other senior gatekeepers bailed on Musk earlier this month. 

In theory, a company could prevent this predicament with a strong board; and compliance officers could protect themselves by cultivating clear, productive lines of communication with that board. In practice that’s not true at Twitter, since right now the board doesn’t even exist; Musk eliminated it and proclaimed himself a board of one. That’s his right as owner of the company, but it’s also arrogant and stupid. 

My question is how many other companies out there behave in Musk-like ways. That is, the board bends to a domineering CEO’s wishes, especially in times of dire financial straits, without stopping to ponder the difficult ethics and compliance questions that tend to crop up when a domineering CEO charges forward with radical strategic shifts. 

That’s a scenario compliance officers would do well to game out in advance. You don’t necessarily need to map out every move — but appreciate how such situations might arise, the predicaments you could find yourself in, and the steps you’d need to take to get yourself out. You’d need to know the red lines for your career and your mental health, including resigning rather than working on a program you don’t support. 

Food for thought, now that the turkey leftovers are almost gone.

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