Selling Twitter to Elon Musk is good for investors. What about the public?

Twitter is “ digital city square where vital questions for the future of humanity are being debated”, proclaimed a triumphant Elon Musk ...


Twitter is “digital city squarewhere vital questions for the future of humanity are being debated”, proclaimed a triumphant Elon Musk by announcing his business to buy the social media platform.

In other words, Twitter is no ordinary company. It is similar to a public service, a single global means of communication.

So should Twitter be governed like a conventional public corporation, with a board focused primarily on raising as much money as possible for shareholders, regardless of the interests of other groups?

In the eyes of some influential business and legal experts, the answer is no. Company directors should also have assessed Mr. Musk’s qualifications to serve as a steward responsible for a vital public communications channel — and, based on public comments from Twitter’s board, there is no evidence that he did.

“The board should have considered the interest of stakeholders such as employees and users in assessing the long-term value of the company,” said Lenore Palladino, associate professor of economics. at the University of Massachusetts, Amherst, and a fellow of the progressive Roosevelt Institute. At New York.

Mr. Musk is a polarizing figure. He’s a world-changing entrepreneur, responsible for companies like PayPal and Tesla that have revolutionized huge industries. He has used his considerable influence – he has 85 million Twitter followers – to speak out against what he sees as a censored liberal culture in technology and media.

He’s also sometimes reckless and temperamental — traits that have landed him in trouble with federal regulators and the subject of a libel lawsuit, among other issues. Just last week he mocked Bill Gates’ beer belly after the Microsoft co-founder allegedly bet against Tesla’s stock price.

The question is whether any of this actually or should have factored into Twitter’s board decision to sell the company to Mr. Musk.

For the past several decades, American corporations and their boards have operated under a legal doctrine known as “shareholder primacy”, which posits that corporate boards should be focused on a single goal, which is to maximize returns to shareholders.

Bret Taylor, chairman of Twitter, closely followed this doctrine on Monday when he said that the board had evaluated Mr. Musk’s offer focusing on “value, certainty and funding” and that the deal would offer a “substantial cash bonus”.

He might as well have been talking about a tool and die maker.

There weren’t even empty words for Twitter’s other stakeholders — its users, employees, and advertisers, to name a few — or its profound importance to public discourse. It’s unclear if board members, in what appears to have been a whirlwind weekend of deliberations, even touched on these topics.

Under current law, mostly established by Delaware courts, boards of directors have “the discretion but not the obligation” to consider the interests of people other than their investors, said Jill Fisch, professor of business law at the Carey Law School of the University of Pennsylvania. But few, if any, exercised that discretion, she said.

In recent years, this shareholder primacy model has come under attack from critics who claim it has enriched shareholders at the expense of just about everything and everyone else: workers, customers, innovation, the planet. .

“Business leaders and practitioners are increasingly committed to paying close attention to the interests of stakeholders, such as customers or society in the case of Twitter, and not just shareholders,” Lucian said. Bebchuk, professor at Harvard Law School. Even so, a study of more than 100 recent billion-plus deals Mr Bebchuk recently closed found there had been little impact, with “significant gains” for shareholders and shareholders. business leaders and little or nothing for other constituencies.

Twitter’s situation shows how “we need to fundamentally change the approach to corporate governance,” said Massachusetts professor Palladino.

Mr. Musk has said he’s not buying Twitter to make money (although he claims he intends to “unlock” the company’s potential). This is undoubtedly a source of concern. Public shareholders, like any other owner seeking to maximize profits, have a financial incentive to attract and retain the greatest number of users. This means that management should ban extremists, to avoid offending or alienating many more users, while seeking to ban as few as possible, to increase the value of the platform for advertisers.

On the other hand, it leaves the company’s management hostage to the whims of Wall Street, whose interests may not be well aligned with those of the general public.

Since his takeover bid was made public earlier this month, Mr. Musk has announced his intention to promote Twitter as a bastion of free speech. Monday, he said he hoped “even my worst critics would stay on Twitter, because that’s what free speech means.”

While Mr. Musk’s public comments so far have been soothing to free speech champions, particularly those on the right who claim Big Tech has silenced conservative viewpoints, there is no guarantee that Mr. Musk will continue to espouse these broad views once he’s in control.

Having renounced the pursuit of profit, Mr. Musk might not care who he offends, either by welcoming extremists or banning those who speak out against him. He is a man who once called first aider a “pedo guy” after the worker criticized Mr. Musk. He was careful not to say where he would draw the line between free speech and hateful or violent speech, which Twitter’s current leadership has, with a particularly flawed track record, attempted to curb.

In a way, it’s easy to sympathize with the eagerness of Twitter’s board to get out of this wasp’s nest while enriching shareholders. Rejecting a takeover bid at a premium to the company’s current stock price would have been a recipe for litigation. Accepting the offer was the path of least resistance, and Ms Fisch said it was unlikely to be successfully challenged in court. or withheld by federal regulators.

On the other hand, there’s a lot more at stake with Twitter than in a normal corporate transaction (although you could make a similar point about CNN, whose parent company was acquired this month by Discovery Inc., or for that matter any other company that purports to serve the public interest).

Perhaps Mr. Musk will prove an excellent steward of the digital city square he will soon own; it is certainly plausible that the board, had it seriously considered the likelihood of Mr. Musk meddling with his ideology or personal interests, would have concluded that he was a relatively safe pair of hands. After all, it’s not like Twitter, in its current cacophony, is some mild-mannered civic discourse utopia.

But the council’s response to Mr. Musk need not be based on a subjective assessment of his character or motivations.

As Ms. Palladino points out, the board could have taken the position that serving the public interest matters most to Twitter’s long-term value, and that selling Twitter to a single private buyer was not in the interest of anyone but the short term. long-term speculators and Mr. Musk himself.



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Newsrust - US Top News: Selling Twitter to Elon Musk is good for investors. What about the public?
Selling Twitter to Elon Musk is good for investors. What about the public?
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