Every day brings a new ESG risk
Issue 20: Since Musk took over Twitter, there's been new ESG(T) risks daily
This past week, a lot was going on between Musk's takeover of Twitter.
Instead of focusing on the upcoming COP27, I put some ESG thoughts about Twitter. I enjoy Twitter as I keep pretty tight control of using it to learn and connect with people who have common interests and uncover the latest news. Furthermore, as COVID spread and we stayed home, I built friendships on the platform, so I have many opinions on what’s happening.
I apologize in advance if you’re all Musk’d out, like me.
First, a little housekeeping. It looks like Revue is one of the many casualties of Musk's Twitter takeover, so I'm moving to Substack. With this news, we have our first ESG takeaway:
A G risk for one company is a G opportunity for another!
Let's get to it!
This past week has been a whirlwind of news and unfortunate activity around one of the world’s most influential social media companies, Twitter. In light of Musk’s takeover, I have observed only what can be called a ‘quiet quitting’ on my Twitter feed. I can only assume many are waiting to see what happens and/or have started moving to Mastodon.
Let’s use this handy timeline from CNET to review the events since Musk took over on October 27th and see what takeaways for ESG we can uncover.
October 27th: Musk takes ownership and fires the board
Musk is currently the CEO of a publicly traded company, Tesla. His attention is spread across several companies, raising some concerns (even from Musk). For example, Tesla is under investigation by the DOJ for claims around its self-driving capabilities. It seems like a wrong time to be ‘away.’
How many companies can one person lead before it harms one of the companies?
This is not a Corporate Governance concern for Musk. Rather than relying on existing expertise, he chose to take a direct leadership role as ‘Chief Twit’ and then:
Musk immediately fired CEO Parag Agrawal and three other top executives. Chief Financial Officer Ned Segal and Vijaya Gadde, the head of legal, policy and trust, were also fired, a source told TheStreet.
Sean Edgett, the general counsel, was escorted out of Twitter's San Francisco headquarters after being fired.
No transition plans were announced, just swift exits. The choice of leadership replacement is highly questionable.
Musk has brought in a friend -- Jason Calacanis -- plus family and lieutenants to tackle the changes he wants to put in place…
So, here’s the next one, and it’s a good one for any company.
Company and board leaders need to have expertise in the core business.
Here, it is worth looking at a relevant example of what the previous leadership did with their understanding of Twitter’s material S risk, social good. Since early 2020, Twitter has taken steps to address disinformation on its platform and only accelerated those efforts as COVID ramped up.
Like any good ESG issue, content moderation across a global environment is a nuanced challenge wrapped in complexity. Gadde, in particular, navigated the waters well, as evidenced by The Daily Dot’s proclamation: ‘Why Elon Musk May Regret Firing Vijaya Gadde.’
…experts in the fields of technology policy, freedom of speech, and content moderation warn that by firing Gadde, Musk removed one of the most fervent defenders of user privacy and free expression online.
October 28th: Who watches the Watchmen?
A common complaint about Twitter has been the number of conservative accounts suspended and removed (including Trump’s) for disinformation and violating Twitter’s terms of service. Out of this, Musk announced plans for a content moderation council as an early effort to assuage one of the biggest downfalls of Twitter in his eyes, the decline of absolutist free speech. Absolutists believe that no speech should ever be censored by anyone, ever.
Twitter had tried to manage those risks as early as 2016 by creating a similar council focused on building trust and inclusivity instead of unfettered free speech.
As we develop products, policies, and programs, our Trust & Safety Council will help us tap into the expertise and input of organizations at the intersection of these issues more efficiently and quickly. In developing the Council, we are taking a global and inclusive approach so that we can hear a diversity of voices from organizations.
The intersection of a material T (technology) platform issue with S through applying good G is how ESG is supposed to work.
An ESG practitioner might consider Musk’s interpretation of free speech a massive risk starting with the impact of abusive speech. Of course, a person being abused on Twitter is unlikely to return to the platform, but that’s only one risk.
ESG issues, like any core business issue, have more than one risk. You have to dig.
Consider that advertisers don’t want to associate their brands in a digital public square that could become a forum for abusive speech and disinformation. This was evident early on in the acquisition process.
(Twitter) Advertising revenue rose 2% year over year to $1.08 billion — a marked slowdown from Q1, when advertising revenue grew 23%.
In case you forgot, Musk got serious about buying Twitter with a 9.2% stake in early April (Q2).
You don’t have to go very far to find another example. Truth Social’s advertising revenue is non-existent.
According to a new filing with the Securities and Exchange Commission, Donald Trump‘s Twitter knockoff hasn’t attracted a single paying advertiser and likely won’t have any until at least next year, assuming it’s even still around then.
Pitting any group against another group, especially when combined with disinformation, puts advertisers in a tricky spot and creates new S and G risks. It can alienate entire social groups who feel unprotected and sow doubts about leaders’ understanding of their core business. Suppose this moderation ‘council’ suddenly rolls back existing thoughtful controls? It could be disastrous for an advertiser’s most valuable intangible - their brand.
ESG risk in one company can also be another’s, based on the relationship.
In pursuing one stakeholder group’s rights,
one may inflict damage on another set of stakeholders.
As the week progressed, Musk was transparent that advertising revenue was gutted and tried to assuage advertisers by ensuring Twitter would not become a ‘hellscape.’
Still, by November 4th, several high-profile companies announced they were pausing their Twitter ads. With Musk now threatening to ‘name and shame these companies to his followers, who will blink first - the companies who understand their risks or Musk?
October 29th: A test of the trolls
The very next day, the trolls tested out what Twitter would allow. Per a Bloomberg article (syndicated here), a couple of things happened very quickly:
A 1,300% increase in one racist slur. At its peak, the word appeared 170 times every five minutes (see Trevor Noah’s take on this).
Mentions of Ivermectin shot up 2,900%, peaking at 358 mentions every five minutes.
Mentions of "plandemic" and antisemitic memes also increased.
Hateful and abusive rhetoric rose around gender issues and trans rights.
At this point, I almost quit the platform, and I wasn’t the only one.
So, here’s the thing. Just like ESG is not black and white, free speech has a lot of nuance to it, so when you tweet things like this…
…just two days earlier, you invite abusive speech onto the platform and introduce a massive S, G, and T issue you can’t control. Per The Washington Post, all of this has not escaped the view of the EU.
A sweeping new law set to come into force in the European Union would force Twitter and other tech companies to fight misinformation and limit the spread of illegal content. E.U. officials said during a news conference Friday that they will be watching to make sure Twitter complies with these new regulations, known as the Digital Services Act.
Here is one EU Commissioner's response.
Never introduce ESG risks in such a high-profile way
that you put yourself on a regulator’s radar.
October 30th: The Chief Twit sends disinformation
Ugh, what a day this was.
The day started with news of a horrific attack on Paul Pelosi, the husband of Nancy Pelosi, Speaker of the House, at their home. Hillary Clinton tweeted an LA Times article that the attacker had ties to extreme right-wing conspiracy sites.
There is so much irony to what happened next that it is worthy of Shakespeare. Musk tweeted a reply to Clinton, stating, “There is a tiny possibility there might be more to this story than meets the eye,” including a link to a far-right conspiracy theory news site. Musk later deleted the tweet.
Here’s where other CxOs, especially a well-qualified general counsel, would rein in the out-of-control leader’s behavior. However, Musk’s opinion of CxOs was evident in a 2019 WSJ interview.
So CEO is a made-up title, CFO is a made-up title, general counsel … They don’t mean anything.
ESG is a real thing that needs to be managed by people.
Not managing it properly is a G issue.
You hire experts like this on your leadership team and not ‘friends and family,’ so that, for example, when you meet with civil rights groups (which Musk did alone), you can be the thoughtful expert in the room to address their concerns.
Special side step: Musk gets checked on disinformation
In case you didn’t know, Twitter started a program called Birdwatch. Here’s what it does:
Contributors can leave notes on any Tweet and if enough contributors from different points of view rate that note as helpful, the note will be publicly shown on a Tweet.
I’m a huge fan of crowdsourcing trust like this and have been contributing as I can. Then, I saw that Musk’s tweets were subjected to Birdwatch because of his claims.
I’ll be curious to see if the program continues.
November 3rd and 4th: Twitter becomes a hellscape (internally)
Let’s fast forward a bit to November 3rd. Twitter announced that in light of so many users feeling the platform and the loss of advertising revenue, layoffs were coming the next day.
The rumors are that 50% of Twitter staff were unceremoniously locked out and laid off. There is nothing but risks as far as the eye can see. Let’s start with the obvious.
Trust was broken by how poorly the layoff announcement and communication were handled.
It also may invite legal action from former employees. Frankly, I find this unsurprising. Musk will likely escape this lawsuit legally unscathed. Still…
One of your most important stakeholders is your employees.
Reputational risk affects talent.
But it gets worse. Per TechCrunch, part of the layoffs included very material ESGT groups, including:
The entire human rights team (S)
The group responsible for accessibility (S - so much for free speech)
The AI ethics team (S, G, T)
Curation (G - accountable for growing value)
Public policy (ESGT)
Only time will tell what risks this will present, but it is almost certain that no new opportunities in these areas will emerge.
Who knows what next week will bring?
With so many ESG and T issues surrounding Twitter and the lack of expertise on these topics now, who knows what will happen next?
We’re already seeing another test of absolutist free speech as some verified users spoof Musk and other accounts and subsequently get banned. Indeed, it will also be interesting to see how the US midterm elections play out, as blue checks are on the table for anyone willing to pay. These might be the platform's next immediate risks, but one thing is sure. ESGT risks will continue until morale improves (which is unlikely)!