Elon Musk is a wild card that could make life difficult for the new Twitter CEO

“We were happy to cooperate and clarify the risks,” Agrawal said, adding that Musk shared on Saturday morning, when his appointment to the board of directors was due to take effect, that he would no longer be joining. “I think it’s for the best.”

It’s unclear exactly what Musk hopes to accomplish with his investment in Twitter. Musk has a huge following on Twitter, and he understands how to use the platform very well. Investors cheered his investment last week, pushing Twitter shares higher. Shares rose in Monday morning trading, suggesting that a seat on the board of directors was not critical to his influence in the eyes of other investors.

But corporate governance experts and tech industry watchers told CNN Business last week that Musk’s unorthodox approach to joining the company could pose a challenge for the company and its new CEO.

“It appears that the CEO has been removed from strategic issues and now needs to consult not with the chairman of the board of directors, but with the permanent acting director for recommendations on the company’s strategy,” said Jason Schletzer, associate professor at Georgetown University’s McDonough School. business.

After Musk turned around on Twitter’s board of directors, the conversation turned to whether he would try to buy up even more shares of the company. As part of his agreement to join the board, Musk said he would not acquire more than a 14.9% stake in Twitter during his tenure, in what some experts believe could be an attempt by the company to curb his influence. Now the agreement is off the table, potentially opening up Musk to buying more shares and taking a more hostile stance towards the company, which could also be a problem for Agrawal.

Agrawal said in a tweet on Sunday night that the Twitter board “felt that having Elon as a trustee of the company, where he, like all members of the board of directors, should act in the best interests of the company and all of our shareholders was the best way to go. forward.”

In a note to investors on Monday, Wedbush analyst Dan Ives said that Musk’s withdrawal from the board of directors “could lead to a variety of scenarios, including 1) joining with a private equity partner and forcing major strategic changes to Twitter and/or a sale, 2) creating more noise and anxiety for the Twitter Board/executives with various proposed platform changes, or 3) Musk says “game over”, reduces his bet and goes home. In our opinion, these are likely paths 1 or 2.”

Twitter confirmed that Musk would no longer be joining the board of directors and pointed to Agrawal’s Sunday statement and declined to comment on the story.

Chaos for the new CEO

When Dorsey made the unexpected decision to step down as CEO in late November, Agrawal, a ten-year veteran of the company, left the reins at a pivotal moment for Twitter. The company was looking to improve its digital advertising business amid broader privacy changes in the marketplace. He sought to achieve the lofty goal of increasing user numbers under pressure from an activist shareholder after periods of stagnation or even declining user numbers. Like other tech companies, it has also faced scrutiny from lawmakers and the public regarding its content moderation practices.
Twitter, while making up a small fraction of competing platforms like Facebook and Instagram, has long been hugely important given its influence in media, politics and finance, among other areas. Agrawal himself seems to have hinted at this influence when he was named CEO. In a memo to employees at the time, he wrote: “The world is watching us right now.”

Musk may have watched too.

“It makes sense – the founder is leaving and the CEO is fairly new, this is a good time for someone to jump in and try to make some changes,” Schletzer said. But, he says, “the way it develops is different from how it would normally develop if there was an activist.” [investor] who interfered.

Even if things were going well with Musk on the board, and Agrawal and Musk’s priorities were broadly aligned, the latter’s involvement and public statements could complicate Agrawal’s role as CEO. In the eyes of the public, and perhaps even within the company, Musk could be seen as some sort of shady CEO. And he could also potentially gain recognition for the initiatives already underway under Agrawal’s leadership.

Musk in recent weeks, for example, hinted at his support Open source standards for Twitter, which Agrawal is already working on at the company. Agrawal has been involved in the development of Bluesky, Twitter’s initiative to create open source decentralized standards for social media, since its early days. In December 2019, when the project was announced, Agrawal said on Twitter that he would be responsible for finding a project leader.
Musk also tweeted vote on Monday, after his stake in the company was revealed, he asked if his followers wanted an edit button, a long-requested, albeit controversial, feature for the platform. And on Thursday he tweeted a meme suggesting that providing Twitter with an edit button would be part of a career domino effect. In fact, Twitter said on Tuesday that it was developing a feature last year that would allow users to edit their tweets, and will roll it out to its Twitter Blue subscription product “in the coming months.”

Last week there were also big questions about what kind of working relationship Musk, who once tweeted a meme equating Agrawal with former Soviet leader Joseph Stalin, would have had with the CEO. In a tweet about forming an “incredible team,” Dorsey on Tuesday raised the question of whether Musk would be directly involved in strategic operating decisions – an unusual role for a board member. According to William Klepper, professor of management at Columbia University Business School, board members typically act collectively, rather than unilaterally, as advisors to executives.

Twitter, in a statement this week, sought to clarify that its board members do not make decisions about the platform’s rules or policies. “As always, our board plays an important advisory role and provides feedback on all of our services,” Twitter spokesman Adrian Zamora said. “Our day-to-day operations and decisions are made by Twitter management and employees.”

Now, it looks like Musk will weigh just as the largest (potentially more if some analysts’ predictions come true) shareholder of Twitter, and not as a member of the board of directors. Agrawal said in a statement Sunday that “we always value the contribution of our shareholders, whether they are on the board or not.”

“Elon is our largest shareholder, and we will be open to his proposals,” he said.

An activist investor?

If Musk is trying to play the part of an activist investor, he does so in an unusual way.

Monday’s disclosure of his more than 9% stake on Twitter came in the form of an Exhibit 13G filing with the Securities and Exchange Commission, a form used for passive investors who don’t plan to push for changes to the company. This seemed to contradict his previous calls for change on Twitter.

Then on Tuesday, Twitter announced that Musk would join the board, Agrawal said the company had been in talks with Musk for “weeks” and Musk said he was looking forward to “significant improvements” to the platform. Later that day, Musk filed a more detailed Form 13D required for active investors.

Musk’s approach also differs from that of the typical activist investor, who usually publicly announces his intention to make changes to the company and lays out a clear case for why the company is undervalued and a strategy for how to improve its financial trajectory.

Elon Musk made another $1 billion from his Twitter stake.  Like he needs it

If Musk wanted to, for example, decentralize the platform (essentially enable other developers to build on top of it), as he suggested, he could lay out an estimate of how much that change would cost the company. “You know, maybe all this has already happened, but so far it has not been stated in discussions in this way,” Schlotzer said.

However, analysts point out that Musk’s influence in the company could be valuable. Musk is “clearly gifted when it comes to being able to find solutions to very serious problems,” said DA Davidson analyst Tom Forte.

To be or not to be a board member?

Musk has mostly served on the boards of his own companies, although he also serves on the board of directors for media conglomerate Endeavor and served on the board of solar panel company SolarCity Corporation before it was acquired by Tesla.

If Musk were to join the Twitter board of directors, it would be normal to expect him to share his platform tips and suggestions with the management team privately, rather than sharing them on Twitter as he has done in the past, especially when he found out sensitive information. about the company, Klepper said.

Musk has a history of getting into trouble with regulators because of his Twitter activities. In 2018, his tweets that Tesla could go private led to a lawsuit by the SEC and a settlement requiring him to pre-screen certain tweets about the company. (Now he is struggling with this requirement.)
The announcement that Musk will no longer sit on the board comes after he posted a series of tweets about the company over the weekend, including one in which he suggested removing the “w” from “Twitter” – an obvious rude a joke that has since been deleted. – and Another in which he asked if Twitter was “dying” because some of its most popular accounts rarely tweet.

“In our opinion, the Twitter board and Musk were unable to reach an agreement regarding Musk’s communication with the public (various polls) via Twitter, as he probably needed to take a more low-key/calm stance as part of joining the board,” Ives. said.

A regulatory filing Monday about Musk’s plan not to join the Twitter board notes that he can now “express his opinion” to the Twitter management team and the public “through social media or other channels regarding [Twitter’s] business, products and services.

Musk’s decision not to sit on the board of directors means a lot of uncertainty – and possibly chaos – for Agrawal, which could call into question his leadership at the beginning of this term or call into question his strategic goals for the company. In his Sunday post, the CEO appeared to acknowledge this, but tried to rally employees.

“There will be distractions ahead, but our goals and priorities remain the same,” Agrawal said. “The decisions we make and how we carry them out are in our hands and no one else’s. Let’s turn off the noise and focus on the work and what we’re building.”

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