Elon Musk, co-founder and chief executive officer of Tesla Inc. (Photo: Patrick T. Fallon/Bloomberg)

A CEO with an active social media presence can be a boost for businesses—it's free marketing and puts a face to the company's name.

But sometimes a Twitter happy CEO overshares, leaving in-house counsel to control the damage. That became a concern at Palo Alto-based Tesla Inc. on Tuesday following a tweet from CEO Elon Musk.

Musk tweeted: “Am considering taking Tesla private at $420. Funding secured.” And both the internet and Wall Street went wild.

If a company's general counsel isn't aware such a revealing tweet is en route to posting, it can leave the legal department in scrambling to react, in conjunction with outside counsel, the board and the CEO.

“Once the tweets have been made, the horse is out of the barn. It's a little bit difficult to do things and the GC may be much more in damage control mode more than anything else,” said Jason Winmill, managing partner at legal department consulting company Argopoint.

Winmill said a good start to that clean up could be contacting outside counsel, especially in a case like Tesla's, in which financial information is shared with the public.

While Musk's posts don't seem to raise any selective-disclosure issues, which could arise if he had disclosed the information to a small group before telling all investors, CNBC reported Tuesday that the U.S. Securities and Exchange Commission has made an inquiry to Tesla about Musk's tweeted claims. When contacted by the Recorder, the SEC declined comment.  

Outside counsel, in this case or other instances of CEO online oversharing, could help clarify the legal complications arising from publicly-aired company information so GCs can formulate a plan.

Winmill said another good first step for GCs concerned with the legal complications of a CEO's tweets is an obvious one—call the CEO, preferably after speaking with outside counsel. If a GC feels it's important for the company's health that the CEO take a Twitter break, having clear legal reasoning from the outside may make that an easier conversation.

“You can't just go in and say, 'Stop [posting], don't do this.' [The CEO] is going to say, why not? And what's the issue? Why do you think this and who do you talk to?” Winmill said. ”But very quickly, I think a wise GC would be in his rights to counsel the CEO to have a bit of a hiatus in communications of that nature until they have assessed the situation.”

If the board does need to get involved, which could be the case for tweets dealing with company finances, Winmill said its best for the GC to first consult the CEO, and for both to meet with the board together, rather than having the GC contact the board separately.

Harlan Loeb, the global chair of Edelman's crisis and risk mitigation practice and an adjunct professor at Northwestern University Law School, said general counsel may want to call the board first. That way, the GC can act as a diplomat who can answer any questions or concerns the tweets may have raised.

The GC should also have ideas or a plan for the board and CEO around what legal concerns have been raised by the tweets, if any, and what the company can do to rectify the situation, he said.

“They need to make it clear to the board that they are looking into it right away, and they'll be prepared to affirmatively address what is going on and to contextualize it in terms of what it means for the business,” Loeb said.