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

These amazing developments are taking Twitter, a company certainly no stranger to corporate chaos, into uncharted waters. Suddenly the richest man in the world, known for his ambitious and innovative spirit as well as his unpredictability and trolliness Behavior, has a powerful place at the table. And he’s coming on board, as is Twitter’s previously little-known (externally, at least) new managing director, Parag Agrawal, is trying to emerge from the shadow of Jack Dorsey, the platform’s founder and longtime public face. Dorsey, who stepped down from the CEO role in November and plans to step down from the Twitter board in May, said this week that Agrawal and Musk “will make an incredible team.”
Almost immediately, the company was the subject of enormous outside speculation. This ranged from asking whether Musk – who had previously suggested Twitter does not allow enough free speech – to whether a new rival was asked platform was necessary – whether he would upend the moderation policy of the social network, whether he would help Restore former President Donald Trump’s account. Within the company that reaction seemed to be mixed; Some employees on Twitter appeared to wonder what his presence would mean for Twitter’s health and safety work, raising concerns about offensive comments Musk had previously made on the platform, including about the trans community.

It’s not exactly clear what Musk wants to achieve with Twitter. Unlike some who have served on the company’s board of directors over the years, Musk has a huge Twitter following and a deep understanding of the platform. Investors have already cheered the move, as Twitter’s shares are up nearly 19% since announcing its stake in the company. But corporate governance experts and tech industry observers say his unorthodox approach to joining the company could create complications for the company and its new CEO.

“It’s almost as if the CEO has been demoted from handling strategic issues and now has to go to a regularly sitting director for advice on corporate strategy, not the CEO,” said Jason Schloetzer, an associate professor at Georgetown University’s McDonough School of business.

Twitter declined to comment on this story.

A “team” member of a new CEO

When Dorsey made the surprise decision to step down as CEO in late November, Agrawal, a decades-long veteran of the company, left the reins at a pivotal moment for Twitter. The company wanted to improve its digital advertising business in the middle broader privacy changes on the market. Pressured by an activist shareholder, it attempted to achieve a lofty target for user growth after periods of stagnant or even declining user numbers. Like other tech companies, it has also come under scrutiny from lawmakers and the public for its content moderation practices.
While a fraction of the size of competing platforms like Facebook and Instagram, Twitter has long held outsized importance due to its influence in media, politics, and finance, among others. Agrawal himself seemed to allude to this influence when he was appointed CEO. in one Notice to employees at the time he wrote: “The world is watching us right now.”

Musk may have been watching, too.

“It makes sense – the founder is stepping down and the CEO is fairly new, this is a good time for someone to step in and try to make a difference,” Schloetzer said. But, he said, “the way this is playing out is different than the way it would normally play out if there were an activist [investor] who interfered.”

Twitter's Parag Agrawal took over as CEO after Jack Dorsey's surprise departure from the role in November.  Agrawal tweeted this photo of him and Dorsey when the leadership change was announced.

Even if all goes well and Agrawal and Musk are generally aligned on priorities, the latter’s involvement and public statements could complicate Agrawal’s role as CEO. Publicly, and perhaps even internally, Musk may appear to be some sort of shadow CEO. He could also potentially get credit for initiatives already underway under Agrawal’s leadership.

For example, Musk has in recent weeks indicated his support for Open source standards for Twitter, which Agrawal has already worked on at the company. From its inception, Agrawal has been involved in the development of Bluesky, a Twitter-born attempt to create open-source, decentralized social media standards. In December 2019, when the project was announced, Agrawal said on Twitter that he would be responsible for finding the leader of the project and laid out a number of potential hurdles to the effort, ending by saying, “Despite these hurdles, we believe there is potential for massive positive impact on Twitter and the company.”
Musk also tweeted a opinion poll on Monday, after his stake in the company was revealed, he asked if his followers would like an edit button, a long-awaited if controversial feature for the platform. And on Thursday, he tweeted a meme that suggests making sure Twitter gets an edit button would be part of the domino effect of his career. Actually Twitter said Tuesday it has developed a function for the past year It will allow users to edit their tweets and roll it out to the Twitter Blue paid subscription product “in the coming months.”

It’s also unclear what kind of working relationship Musk, who once tweeted a meme equating Agrawal with former Soviet leader Joseph Stalin, will have with the CEO. With his tweet about forming an “incredible team” Dorsey questioned Tuesday whether Musk would be directly involved in strategic operational decisions — an unusual role for a board member. According to William Klepper, a management professor at Columbia Business School, board members also typically act as a collective rather than as unilateral advisors to executives.

Twitter tried to clarify in a statement this week that its board members make no decisions about the platform’s rules or policies. “As always, our board plays an important advisory and feedback role across our service,” said Twitter spokesman Adrian Zamora. “Our day-to-day operations and decisions are made by Twitter’s management and employees.”

An activist investor?

When Musk tries to play the role of an activist investor, he does so in an unusual way.

That Monday’s disclosure of its more than 9% stake in Twitter came in the form of a Schedule 13G filing with the Securities and Exchange Commission, a form used for passive investors who do not intend to drive change in a company. That seemed to contradict his previous calls for changes on Twitter.

Then, on Tuesday, Twitter announced Musk would be joining the board, Agrawal said the company had been in talks with Musk for “weeks,” and Musk said he looked forward to making “significant improvements” to the platform. Later that day, Musk submitted the more detailed 13D form required by active investors.

Musk’s approach also differs from that of a typical activist investor, who typically announces their intention to make changes at a company publicly, presents a clear case as to why a company is undervalued, and presents a strategy to improve its financial performance.

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

For example, if Musk had had a desire to decentralize the platform (essentially allowing other developers to build on top of it), as he has suggested, he might have produced an estimate of the value of this change to the company. “You know, maybe all of this has already happened, but it hasn’t been presented that way in the discussion so far,” Schlotzer said.

Still, analysts have pointed out that Musk’s influence on the company could be valuable. Musk is “clearly gifted when it comes to finding solutions to very big challenges,” said DA Davidson analyst Tom Forte.

transition to the board

Musk has served primarily on the boards of his own companies, although he was also a board member of media conglomerate Endeavor and a board member of solar installation company SolarCity Corporation before it was acquired by Tesla.

Once Musk officially joins the Twitter board, the normal expectation would Be sure to share his advice and suggestions for the platform privately with the management team instead of sharing it on Twitter as in the past, particularly when he learns proprietary information about the company, Klepper said.

“He can recommend that management, the CEO and the executive team take a different strategic view of the company than they currently do, and that could be positive in a number of ways,” Klepper said. But when “he starts saying things outside of the boardroom that should stay in the boardroom … and, say, the stock tanks for one reason or another as a result, the entire board is exposed to his error.”

Musk has gotten into hot water with regulators over his activities on Twitter in the past. In 2018, his tweets about Tesla’s possible privatization led to a lawsuit from the SEC and a settlement He must pre-screen certain tweets about the company. (He is now Battle this requirement.)

By appointing him to the board for two years, Twitter got him to agree to buy no more than 14.9% of his shares — which would give him even more leverage over the company — while he served as a board member. but there’s no guarantee nothing will change once his tenure is over. On the other hand, it could become a problem for Twitter stock if Musk, who has a history of triggering wild price swings in assets he tweets about, decides to divest his stake in the company for any reason.

If things go sideways, it could reflect badly on Agrawal, Klepper said, potentially leaving a stain on his leadership early in his tenure. “While Elon brings a lot of good things to Twitter, he also brings some baggage,” Forte said.

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