It isn’t clear precisely what Musk hopes to perform at Twitter. In contrast to some who’ve served on the corporate’s board over time, Musk has an enormous Twitter following and a deep understanding of the platform. Buyers have already cheered the transfer, with Twitter’s fill up practically 19% since his stake within the firm was revealed. However company governance consultants and tech business watchers say his unorthodox method to becoming a member of the corporate may create problems for the corporate and its new chief government.
“It virtually appears the CEO was type of demoted from dealing with strategic points and now must seek the advice of not the chairman of the board, however an everyday sitting director for recommendation on firm technique,” stated Jason Schloetzer, an affiliate professor at Georgetown College’s McDonough College of Enterprise.
Twitter declined to remark for this story.
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A ‘staff’ member to a brand new CEO
Musk could have been watching, too.
“It is sensible — the founder is stepping away and the CEO is fairly new, that is a superb time for anyone to step in and attempt to impact some change,” Schloetzer stated. However, he stated, “the best way that that’s evolving is totally different than the best way it will usually evolve if there was an activist [investor] who was getting concerned.”
Even when all goes effectively and Agrawal and Musk are usually aligned on priorities, the latter’s involvement and public statements may complicate Agrawal’s function as CEO. Within the public eye, and maybe even internally, Musk may have the notion of being a shadow CEO of types. He may additionally probably get credit score for initiatives that have been already underway underneath Agrawal’s management.
It is also unclear what sort of working relationship Musk, who as soon as tweeted a meme that equated Agrawal to former Soviet chief Joseph Stalin, can have with the CEO. Along with his tweet about forming an “unbelievable staff,” Dorsey on Tuesday raised questions on whether or not Musk can be instantly concerned in strategic operational selections — an uncommon function for a board member. Board members additionally sometimes act as a collective, fairly than unilaterally, as advisers to executives, in line with William Klepper, a administration professor at Columbia Enterprise College.
Twitter in an announcement this week tried to make clear that its board members don’t make selections in regards to the platform’s guidelines or insurance policies. “As at all times, our Board performs an essential advisory and suggestions function throughout everything of our service,” Twitter spokesperson Adrian Zamora stated. “Our daily operations and selections are made by Twitter administration and workers.”
An activist investor?
If Musk is making an attempt to play the function of an activist investor, he is going about it in an uncommon method.
The Monday disclosure of his greater than 9% possession stake in Twitter got here within the type of a Schedule 13G submitting with the Securities and Trade Fee, a kind used for passive traders who do not plan to push for modifications at an organization. That appeared to contradict his earlier requires modifications at Twitter.
Then on Tuesday, Twitter introduced that Musk can be becoming a member of the board, Agrawal stated the corporate had been in talks with Musk for “weeks,” and Musk stated he regarded ahead to creating “important enhancements” to the platform. Later that day, Musk filed the extra detailed 13D kind required of lively traders.
Musk’s method has additionally differed from that of a typical activist investor, who would usually announce their intention to make modifications at an organization publicly, and lay out a transparent argument for why an organization is undervalued and a method for enhance its monetary trajectory.
If Musk’s want was, for instance, to decentralize the platform (basically, make it potential for different builders to construct on high of it), as he has recommended, he may need laid out an estimate of what that change can be price to the corporate. “, perhaps all that has already occurred, but it surely hasn’t been laid out that method within the dialogue to date,” Schlotzer stated.
Nonetheless, analysts have pointed to the potential for Musk’s affect on the firm to be precious. Musk is “clearly gifted relating to with the ability to give you options for very massive challenges,” D.A. Davidson analyst Tom Forte stated.
Transitioning onto the board
Musk has principally served on the boards of his personal corporations, though he’s additionally a director on the board of media conglomerate Endeavor and served on the board of photo voltaic set up firm SolarCity Company earlier than it was acquired by Tesla.
As soon as Musk has formally joined the Twitter board, the conventional expectation would be that he carry his recommendation and ideas for the platform to the administration staff privately, fairly than sharing them on Twitter as he has accomplished up to now, particularly as he learns proprietary details about the corporate, Klepper stated.
“He can suggest that administration, the CEO and management staff, take a special strategic view of the corporate than they presently are, and in lots of ways in which could possibly be a optimistic factor,” Klepper stated. But when “he begins saying issues exterior the boardroom that ought to keep contained in the boardroom … and as an example the inventory for one purpose or one other tanks because of that, the entire board is topic to his error.”
In naming him to the board for 2 years, Twitter received Musk to agree to not purchase up greater than 14.9% of its shares — which might give him an much more highly effective maintain over the corporate — whereas serving as a board member, however there is not any assure that will not change as soon as his time period is over. Then again, it could possibly be an issue for Twitter’s inventory if Musk, who has a historical past of with the ability to immediate wild swings within the costs of property he tweets about, decides to dump his stake within the firm for any purpose.
If issues go sideways, it may mirror badly on Agrawal, Klepper stated, probably placing a stain on his management early in his tenure. “Whereas Elon brings many good issues to Twitter, he additionally brings some baggage,” Forte stated.
