By Tom Ozimek
Twitter co-founder Jack Dorsey penned a scathing tweet over the weekend calling the company’s board of directors a consistent source of dysfunction after Tesla CEO Elon Musk accused the Twitter board of failing to represent the interest of shareholders.
Dorsey made the remark in a tweet thread initiated by Garry Tan, co-founder of Initialized Capital, who said that having the “wrong partner on your board can literally make a billion dollars in value evaporate” adding that it’s the reason for a “surprising percentage” of startup failures.
Weighing in on Tan’s tweet was Tren Griffin, former partner at private equity firm Eagle River, who shared an article on the impact of board dysfunction on business that cited Fred Destin, founder of venture capital firm Stride.
“What I do know for sure is that this old Silicon Valley proverb is grounded in age-old wisdom that still applies today: Good boards don’t create good companies, but a bad board will kill a company every time,” Destin was cited as saying.
Dorsey commented in the thread by saying these were “big facts,” prompting a user to say that the history of the Twitter board shows it has been “mired in plots and coups” that were so intriguing as to merit a “Hollywood thriller one day.”
The Twitter board, Dorsey then replied, has “consistently been the dysfunction of the company.”
The Epoch Times has reached out to Twitter for comment.
Dorsey’s remarks came on the heels of a statement by Musk, who accused the Twitter board of not representing the interest of its shareholders.
“Wow, with Jack departing, the Twitter board collectively owns almost no shares! Objectively, their economic interests are simply not aligned with shareholders,” Musk said in a tweet replying to a post showing a chart of the ownership percentages of Twitter board members.
Based on Twitter’s latest filing with U.S. Securities and Exchange Commission (SEC), the 14 executive officers and directors own 2.7 percent of the company’s share. Of the 2.7 percent, Jack Dorsey, the CEO turned board chair owns 2.4 percent and the others own only 0.3 percent.
Twitter’s board of directors on Friday approved a provision known in the financial world as a “poison pill” to ward off Musk’s potential hostile takeover after Musk said he wants to buy the company for around $43 billion. The poison pill tactic has been by other companies in the past to dilute outstanding stock and make a hostile takeover more financially challenging for the potential acquirer.
Following earlier rumors that Twitter had been mulling a poison pill method after he launched his takeover bid, Musk said in a tweet that the move could expose the board to a “titanic” amount of liability because they would be “breaching their fiduciary duty.”
Twitter said in an April 15 statement that the poison pill tactic, also known as a limited duration shareholder rights plan, was a move in the best interest of holders of Twitter stock as it would “reduce the likelihood that any entity, person or group gains control of Twitter through open market accumulation without paying all shareholders an appropriate control premium or without providing the Board sufficient time to make informed judgments and take actions that are in the best interests of shareholders.”
Adam Candeub, a law professor at Michigan State University, told The Epoch Times before the shareholder rights plan decision was announced that the board could face legal consequences if they turn down an offer that’s financially lucrative to shareholders.
“Twitter’s owned by shareholders, and the directors have to act in a way that’s in their best interests, not in the way that allows them to keep control of the corporation,” Candeub told The Epoch Times.
“If they turn down a very favorable price, there will be dereliction of their legal duty, and there could be lots of legal consequences.”
Under Twitter’s poison pill provision, if any entity, person, or group acquires 15 percent or more of Twitter’s outstanding stock in a transaction not approved by the board, other stockholders will be able to buy additional shares of common stock at a lower price.
Allen Zhong, Emel Akan, and Zachary Stieber contributed to this report.