In early August, the world’s famous electric veichle(EV) maker, Tesla, annouced that the company will issue debt worth 1.5 billion to fund the Model 3 production. As Tesla has receved “455,000 reservations” (Carey, N. August 07, 2017) for the Model 3, it reveals consumers; growing interest in EVs. Simutaneously, the price of Tesla’s share has been growing rapidly from the beginning of 2017. Despite the negative retained earnings on balance sheet, Tesla gains additional paid in capital(APIC) through the thriving share price which sets the total equity back to positive. In the cash-flow statement, Tesla has arrived at negative net-income in four consecutive years, and is currently at negative 798 million dollars from the second quater report.

Tesla has demonstrated its leadership by bring a revolution on world’s energy utility trend: from fossil fuel to electric. As a result, multiple nations, including the largest developing country, China, is in progress on promoting environmental friendly policies by banning internal combustion engines(China banning internal combustion engine September 14, 2017). In other words, Tesla is seen as the driving force, by both governments and consumers, to change consumers’ behavior on energy consumption. As a response, investors’ expectation for Tesla, shown by the significant increase in share price, grows beyond merely an EV maker, but a future energy resource that will be potentially treated in similar manner as the OPECs nowadays. This faith from investors does not simply come from the increasing numbers of Teclas on road, but from the merger between Tesla and SolarCity(Ferris, R November 17, 2017).

SolarCity is a company that provides solar panels for both small scaled units, homes, to large units such as business or even government. Through this acquisition, Tesla conveyed its future direction to promote increasingly environmental sustainable products, just like CVS taking its stand on promoting public wellness via the Tabaco ban. Thus, Tesla presents its public image as a leader in new energy trend, which raises the question: are vehicles with high engine-displacement made unethical in environmental aspect?

However, all the expectations on Tesla is not sufficient to support the growing share price while Tesla continuously issue debt to balance the spend on investment activities. It is clear that the only positive number displayed on the cash-flow statement is financial actives, and it is highly possible that investors are out looking for a practical benefit being announced from the acquisition synergies as well as a return from bond issued. 

Carey, N., & Lienert, P. (2017, August 07). Tesla seeks $1.5 billion junk bond issue to fund Model 3 production. Retrieved September 27, 2017, from https://www.reuters.com/article/us-tesla-offering/tesla-seeks-1-5-billion-junk-bond-issue-to-fund-model-3-production-idUSKBN1AN13I

China moves towards banning the internal combustion engine. (2017, September 14). Retrieved September 27, 2017, from https://www.economist.com/news/business/21728980-its-government-developing-plan-phase-out-vehicles-powered-fossil-fuels-china-moves

Ferris, R. (2016, November 17). Tesla and SolarCity merger gets approval from shareholders. Retrieved September 27, 2017, from https://www.cnbc.com/2016/11/17/solarcity-shareholders-vote-on-tesla-merger.html

Business’s ethics, normally argued around whether a firm ought to make as much profit as possible for its shareholders that only allows it to follow the basic laws and regulations, or take a step back to participate its social responsibility with certain amount of sacrificed profit. (1) Taking the incidence happened 2016 as an example, when the Note 7 from Samsung, was recalled twice after encountering flaming due to battery’s malfunction. The complete recall was announced in October 2016, and the investigation result was announced in January 2017, clarified reasons for the incidences.

As the first incident was caused by deflection of negative electrode and the replacement battery, after first recall, had high welding burrs affecting negative electrode, there were even missing insolation layers from the replacing battery. (2) Although Samsung stepped into its responsibility quickly and regained trust from the market in 2017 with a 2% increase in market share in handheld phone division (6), it raises the question mentioned in the beginning of this post: should a firm make as much profit as possible by merely following basic laws and regulations, or participate more in its role of social responsibility with certain amount of sacrificed profit?

It is clear, after the intensive laboratory investigations, that Samsung is fully capable to establish the “8-Point Battery Safety Check”(3) before the incidences occur. If the business is fully capable and ethically obligated to ensure public wellness related to its consumers, why weren’t these safety inspections applied in the first place? Since these safety checks are required for each individual phone manufactured, the cost will rise, and the profit will drop, which is unlikely to be agreed by the board of directors if incidences had not happened. Thus, obviously, although Samsung’s CEO, Oh-Hyun Kwon claims to “endorse the UN Sustainable Development Goals (UN SDGs)”(5), profit might still be overweighed before the Note 7 recalls. 

However, as a contract to the prediction profit decline through increasing cost with the safety concern, in first quarterly report, Samsung’s profit inclined (6). The Samsung’s reaction, from recalls to sharing testing results to “global standardization bodies”(2), shows how a firm step into its social responsibility and starts to create social value rather than simply maximizing profit. By taking the perspective to see solutions for social challenges as opportunities for profits, Samsung has achieved the 2% increase of market share in its cellphone division as well as the increase in revenue within an annual quarter (6), demonstrating a positive response to the social responsibility it took with the incident.

Work Cited

1. http://www.investopedia.com/terms/b/business-ethics.asp
2. https://www.forbes.com/sites/maribellopez/2017/01/22/samsung-reveals-cause-of-note-7-issue-turns-crisis-into-opportunity/#9ccf9c24f12d
3. http://www.samsung.com/us/explore/committed-to-quality/
4. https://www.nytimes.com/2016/12/14/technology/personaltech/biggest-tech-failures-and-successes-of-2016.html
5. Samsung. Samsung Electronics Sustainability Report 2017. 2017. Web. 12 September 2017
6. Samsung. 1Q Interim Business Report. 31 March 2017. Web. 12 September 2017