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Here’s Why The Twitter Board Viciously Opposes A Musk Takeover

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Elon Musk’s takeover of Twitter has awakened a flurry of controversy and debate over the future of free speech, Big Tech, and the influence of millionaires on means of communication. However, one aspect has gone underreported is that the dysfunctional role and financial interests of the Twitter board, which would suffer greatly from a potential Musk takeover.

Twitter’s board has employed a tactic called a “poison pill” to prevent Musk from buying all the shares of the company. The tactic will allow existing shareholders (except Musk) to buy new shares at a discounted price, which would force Musk to buy the shares at a higher price, potentially making it extremely expensive for him.

The question, however, is why is the board so set to prevent Musk from buying the company? After all, the Tesla founder offered an incredibly lucrative pitch to buy the company for $43 billion, valuating each share at $54.20 which is almost $8 higher than the highest price of the shares over the last month.

The history of dysfunction and contradictory financial interests of the social media platform board might help explain the reasons why the Twitter board is doing dead set against Musk’s offer.

Although there are a wide variety of factors that could explain why the Board is set against a Musk Takeover (politics, outside pressures, inner fights within the board, etc.) one crucial reason is the set of financial interests of the board, which will be immediately lost if Musk wins complete control of the company.

Musk is attempting to buy all the shares of Twitter (EFE)

If the Musk takeover succeeds, the board loses.  

The most obvious financial interest of the Twitter board is that they earn hundreds of thousands of dollars each year in salaries. The manager of the Future Fund LLC, Gary Black, pointed out that the Twitter board earns between $250,000 and $300,000 per year as a salary for being part of the board. Of course, if Twitter is bought by Musk and goes private, the board itself would lose its significance and its members would most likely lose their salaries.

Musk has said publicly that if he buys the company, he will immediately cut the salary of the members of the board to $0 a year, arguing that such a move will at least save $3 million for the company. The figure that Black and Musk are referring to does not include the CEO’s salary, who is paid $623,000 a year for directing the daily operations of the company on behalf of the investors.

Although the board has the theoretical duty to represent the best interests of the shareholders, Musk has continuously lambasted the board by accusing them of not representing the financial interests of the shareholders. The billionaire said on Saturday that the board does not represent the economic interests of the company, a claim that he had repeated back in November when he pointed out that, after the exit of Jack Dorsey, the Twitter board owned almost no shares of the company.

Jack Dorsey, Twitter’s founder, has criticized the board for being dysfunctional (EFE)

This critique was also repeated by Black, who highlighted that a vast majority of the board members own less than 0.1% of Twitter’s shares, saying that Twitter’s board “interests aren’t aligned with TWTR shareholders. The board serves to represent shareholders. If they refuse to act in the best interest of SHs, they should be removed and replaced by new board members who understand their fiduciary obligations.”

The board has also received fire from Twitter’s founder Jack Dorsey, who tweeted that the ineffectiveness of the board has “consistently been the dysfunction of the company,” Dorsey also agreed with a tweet by a venture capitalist arguing that “good boards don’t create good companies, but a bad board will kill a company every time.”

The final outcome of Musk’s takeover of Twitter is yet to be defined, as the billionaire will have to surpass a slew of political and economic challenges for his move to be successful. The apparent conflict of interests of the Twitter Board, however, will be an effective attacking point for Musk’s chances to buy the company.

Daniel is a Political Science and Economics student from the University of South Florida. He worked as a congressional intern to Rep. Gus Bilirakis (FL-12) from January to May 2020. He also is the head of international analysis at Politiks // Daniel es un estudiante de Cs Políticas y Economía en la Universidad del Sur de la Florida. Trabajo como pasante legislativo para el Representate Gus Bilirakis (FL-12) desde enero hasta mayo del 2020. Daniel también es el jefe de análisis internacional de Politiks.

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