Elon Musk’s decision to use cannabis on the air shows CEO dazed and confused by tone

Dude, what are you, high?

There was a time when Elon Musk’s live-streamed puff of marijuana would have only enhanced the image of an iconoclastic business magnate who can’t be bothered by social conventions in his quest to change the world. But an ill-advised tweet last month by the Tesla Inc. CEO led to serious questions about his stability and self-medication, changing the narrative in ways he seems not to have grasped.

“It’s particularly troubling given the issues that he has had already,” said Kabrina Chang, an associate professor at the Boston University Questrom School of Business, who studies corporate ethics and labor laws. “If I were a board member or investor, this would not give me a ton of confidence that he’s moving in that direction. It does not seem like forward progress in terms of governance and professionalism of Tesla.”

Musk, 47, sipped whiskey during a more than 2 1/2-hour podcast with comedian Joe Rogan late Thursday that touched on topics from flame throwers and artificial intelligence to the end of the universe. While he said he was “not a regular smoker of weed,” he took a drag from what Rogan described as a blunt containing tobacco mixed with marijuana, which is legal in California.

“You want some of it? You probably can’t because stockholders, right?” Rogan asked. Musk replied “I mean it’s legal, right?” and then took a drag.

Musk is under pressure to show competence. His spur-of-the-moment tweet that he planned to take Tesla private, only to drop the idea a little more than two weeks later, drew shareholder lawsuits and an investigation by federal securities regulators. His past jokes about tweeting after taking Ambien and drinking wine didn’t seem so funny anymore, and he defended his use of the prescription sleep aid in a New York Times interview.

Just hours after Musk finished smoking marijuana in the interview streamed live online, it was confirmed that both his chief accounting officer and head of human resources were leaving Tesla. The company’s shares fell 6.3 percent to $263.24, the lowest close since April 2, and have plunged about 30 percent since the day of his initial take-private tweets.

See story: Tesla Erupts in Chaos as Executives Leave, Musk Tokes Up

“The use of recreational drugs, legal or not, goes against the unspoken rules of being a public CEO,” Gene Munster, a managing partner at venture capital firm Loup Ventures and a longtime Tesla supporter, wrote Friday. Musk’s actions are making it “harder to support Tesla as a company,” even as the fundamentals are improving, Munster said.

Even in the cannabis industry, smoking weed as a CEO or top executive in a non-recreational setting is seen as unprofessional, Chris Walsh, founder and vice president of the publication Marijuana Business Daily, said in an interview. In the early days of the industry, it might have been common for people to use their product in a work setting, but those days have mostly passed, he said.

Getting high in an interview would be a non-starter, agreed Derek Peterson, CEO of Terra Tech Corp., which runs Blum retail stores in California and Nevada selling recreational and medicinal cannabis products. His employees aren’t allowed to use marijuana in the workplace and there’s a clear policy to discourage abuse, even though it’s the company’s product line.

“I’ve been a CEO of our company since 2010 and I can’t think of a single time that I did that, to be frank, just because I put a significant separation in between my work and my social time,” Peterson said. “Especially in light of what he’s going through right now, from an optics perspective, I think those are the times you need to kind of hunker down and play a little bit of defense and not give any more to the naysayers.”

So far, legal precedent has favored a company’s right to fire an employee for testing positive for or using marijuana in a workplace, even when it’s been prescribed by a doctor, Chang said. That’s because while the drug is legal in some states, it remains illegal under federal law.

Tesla board members didn’t respond to requests for comment on Musk’s marijuana use. In a blog post announcing a series of promotions late Friday to fill several voids left by senior management departures, Musk made no reference to the episode, though he advised Tesla employees to ignore the news media and focus on Tesla’s growth.

For former Tesla production employee Crystal Guardado, the image of Musk enveloped in a cloud of smoke was particularly jarring, because she says the company fired her in last year for testing positive for THC, the active ingredient in marijuana.

“It was just like a slap in the face to me and my son,” said Guardado, a single mother who worked at Tesla’s Fremont, California, factory for four months before being dismissed. “Elon Musk is just smoking it out in the open, knowing that he uses his very vague drug policy as a way to fire people that are a threat to him.”

Guardado said she had previously notified Tesla of her outside-work, doctor-recommended use of drops that could make her test positive for THC. She contends that THC was used as a pretext to retaliate against her for being vocal about safety issues and supporting the United Auto Workers union.

Tesla said it hasn’t fired anyone for supporting the UAW organizing efforts. Guardado was terminated because she violated the substance abuse and testing policy, according to the company. Musk told the Guardian Friday that Tesla’s policy allows for trace amounts of THC in the body during work hours.

“The issue here is not whether smoking pot is ethical or not,” said Tae Wan Kim, an associate professor of business ethics at the Tepper School of Business at Carnegie Mellon University. “It boils down to the basic assumption whether the CEO, as a trustee of Tesla’s stakeholders, has a duty to be aware of public reactions to his behaviors. As a free person, at least in California, Musk has right to smoke pot wherever he wants. But with his CEO hat on, he should have seen that his reactions would provoke negative impact from the Wall Street.”

The Tesla board needs to act quickly to get a handle on the situation, said Betsy Atkins, a director at companies including Volvo Cars and Wynn Resorts Ltd. The electric-car maker’s board needs to consider hiring an executive to assist with day-to-day operations, she said.

“As a board member at Tesla, it’s got to be clear to you that your CEO is in distress,” Atkins said in an interview. “It’s hard to see this behavior as other than either deliberate acting out, or a call for help. Or an, ‘I don’t give a hoot.’ It’s one of those things.”

–With assistance from Gabrielle Coppola and Dana Hull .

To contact the reporters on this story: Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net, Josh Eidelson in Washington at jeidelson@bloomberg.net.

To contact the editor responsible for this story: Craig Trudell at ctrudell1@bloomberg.net.

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