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

These startling developments have placed Twitter, a company that is certainly no stranger to corporate chaos, in uncharted waters. Suddenly the richest man in the world, who is known both for his ambitious and innovative spirit and for his erratic and troll character demeanor, has a powerful seat at the table. And it comes just as Parag Agrawal, the hitherto little-known (at least from the outside) new chief executive of Twitter, is trying to step out of the shadow of Jack Dorsey, the platform’s founder and public face of long time. Dorsey, who stepped down as CEO in November and plans to step down from Twitter’s board in May, said this week that Agrawal and Musk “would be an amazing team.”
Almost immediately, the company was the subject of enormous external speculation. This ranged from whether Musk – who had previously suggested that Twitter does not allow free speech enough and asked if a new rival platform was needed – would upset the social network’s content moderation policies on whether it would help restore former President Donald Trump’s account. Inside the company, the reaction seems mixed; some employees on Twitter seemed to wonder what his presence would mean for Twitter’s health and safety work and raised concerns about insulting comments Musk had previously made on the platform, including about the trans community.

It’s unclear exactly what Musk hopes to accomplish on Twitter. Unlike some who have served on the company’s board over the years, Musk has a massive following on Twitter and a deep understanding of the platform. Investors have already applauded the move, with Twitter shares rising nearly 19% since its stake in the company was disclosed. But corporate governance experts and tech industry watchers say his unorthodox approach to joining the company could create complications for the company and its new chief executive.

“It almost seems like the CEO has been kind of demoted from managing strategic issues and now has to consult not the chairman of the board, but a regular serving director for advice on corporate strategy. “said Jason Schloetzer, an associate professor at Georgetown University’s McDonough School. work.

Twitter declined to comment for this story.

A member of a new CEO’s “team”

When Dorsey made the surprise decision to step down as CEO in late November, it left Agrawal, a decade-long company veteran, holding the reins at a pivotal time for Twitter. The company was looking to improve its digital advertising business amid broader privacy changes in the marketplace. It was seeking to achieve an ambitious goal of user growth under pressure from an activist shareholder, after periods of stagnation or even decline in user numbers. Like other tech companies, it also faced intense scrutiny from lawmakers and the public over its content moderation practices.
Twitter, though a fraction of the size of rival platforms like Facebook and Instagram, has long been outsized given its influence in media, politics and finance, among other areas. Agrawal himself seemed to hint at this impact 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 stepping down and the CEO is pretty new, it’s a good time for someone to step in and try to make some changes,” Schloetzer said. But, he said, “the way it evolves is different from the way it would normally evolve if there was a militant [investor] who got involved.”

Twitter's Parag Agrawal took over as CEO following the surprise exit of Jack Dorsey 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. In the eyes of the public, and perhaps even internally, Musk might feel like some kind of shadow CEO. It could also potentially get credit for initiatives already underway under Agrawal’s leadership.

Musk has in recent weeks, for example, hints at his support for open source standards for Twitter, something Agrawal has already worked on at the company. Agrawal has been involved in the development of Bluesky — a Twitter-born effort to create open-source, decentralized standards for social media — since its inception. In December 2019, when the project was announced, Agrawal said on Twitter that he would be responsible for finding the lead for the project and presented a series of potential obstacles to the effort, ending with: “Despite these obstacles, we believe there is potential for massive positive impact for Twitter and for society.”
Musk also tweeted a survey on Monday, after his stake in the company came to light, asking 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 making sure Twitter got an edit button would be part of his career’s domino effect. Indeed, Twitter said on Tuesday that it had been developing a feature for a year which will allow users to edit their tweets and will roll it out to its paid subscription product Twitter Blue “in the coming months”.

It’s also unclear what kind of working relationship Musk, who once tweeted a meme that equates Agrawal with former Soviet leader Joseph Stalin, will have with the CEO. With his 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. Board members also typically act collectively, rather than unilaterally, as advisers to executives, according to William Klepper, a management professor at Columbia Business School.

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

An activist investor?

If Musk is trying to play the part of an activist investor, he’s going about it in an unusual way.

the On Monday, the disclosure of his 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 have no intention of forcing changes in a company. This 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 hoped to make “meaningful improvements” to the platform. shape. Later that day, Musk filed the more detailed Form 13D required of active investors.

Musk’s approach also differs from that of a typical activist investor, who would normally publicly announce his intention to make changes to a company and lay out a clear argument for why a company is undervalued and a strategy to improve its trajectory. financial.

Elon Musk has earned another $1 billion from his Twitter stake.  As if he needed it

If Musk’s desire was, say, to decentralize the platform (essentially, allow other developers to build on it), as he suggested, he could have presented an estimate of what that change would be worth. for the society. “You know, maybe all of this has happened before, but it hasn’t been framed that way in the discussion so far,” Schlotzer said.

Still, analysts have pointed to Musk’s potential for influence within the company. Musk is “clearly good at finding solutions to really big challenges,” said DA Davidson analyst Tom Forte.

Transition on set

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

Once Musk officially joined Twitter’s board, the normal expectation would be or that he brings his advice and suggestions for the platform to the leadership team privately, rather than sharing it on Twitter as he has done in the past, especially as he learns information exclusives on the company, Klepper said.

“He may recommend that management, the CEO and the management team take a different strategic view of the business than they currently have, and in many ways that could be a positive thing,” Klepper said. But if “he starts saying things outside the meeting room that should stay inside the meeting room…and let’s say the stock for some reason or another results from that, the whole advice is subject to its error”.

Musk is used to getting into hot water with regulators over his Twitter activities. In 2018, his tweets about the possibility of taking Tesla private led to an SEC lawsuit and a settlement requiring him to have certain tweets about the company pre-reviewed. (He is now fighting that requirement.)

Appointing him to the board for two years, Twitter convinced Musk not to buy back no more than 14.9% of his shares – which would give him an even more powerful grip on the company – while serving on the board. ‘administration, but there is no guarantee that he will not change once his term ends. On the other hand, it could be a problem for Twitter shares if Musk, who has a history of causing wild swings in the prices of the assets he tweets about, decides to shed his stake in the company to any reason.

If things go wrong, it could affect Agrawal badly, Klepper said, which could hurt his leadership early in his term. “While Elon brings a lot of good things to Twitter, he also brings baggage,” Forte said.

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