OBSERVATIONS FROM THE FINTECH SNARK TANK
The story of how Elon Musk attempted a takeover of Twitter, attempted to back out of that takeover, and was then ultimately forced to complete the deal has been well told in the press (including here on Forbes).
A new study, however, sheds new light on the acquisition’s impact on Twitter employees and how Twitter’s key executives and board abandoned the social media platform’s mission statement and core values.
The study, titled How Twitter Pushed Stakeholders Under The Bus, claims that:
“When negotiating the deal, Twitter’s corporate leaders chose to focus exclusively on the interests of their shareholders and the private interests of corporate leaders themselves. Despite their stakeholder rhetoric over the years, Twitter’s corporate leaders essentially chose to push their stakeholders under the (Musk) bus.”
How Much Did Twitter Insiders Make On The Deal?
With Musk’s offer to acquire Twitter at a 38% stock price premium, it’s not surprising that Twitter’s top four executives made a lot of money on the deal.
From a stock price premium perspective, the top four execs reaped a $74.3 million windfall from the shares they held. Gains weren’t limited to the price premium. Restricted and performance stock units (RSUs and PSUs) added $138 million to the executive team’s payday.
Eight non-executive directors also made out well, earning $68 million in share price appreciation, $20 million from stock options, and $5 million in RSUs and PSUs.
Hypocri-twits In The Twitter Boardroom
What did the executive team and board do to protect Twitter employees’ interests? Not much. According to the study:
“Given that any acquisition might be followed by layoffs, and that this risk was clear and present in the case of the Twitter acquisition, it might be expected that employee-oriented corporate leaders would seek to use some part of the surplus created by the deal to cushion employees who stood to lose their employment.”
Not a good expectation in this case.
The agreement placed no limitations regarding the scale and speed with which Musk could fire his new “tweeps” (the company’s term for its employees). Not only did the deal fail to promise compensation or monetary benefits to laid-off employees, it actually precluded Twitter from providing employees with such promises between the signing and closing of the deal, according to the study.
The study’s authors pointed out:
“Employee-oriented corporate leaders could have declined to tie their hands from amending the terms of employee contracts. Given the small size of this monetary commitment relative to the deal premium or acquisition price, retaining the board’s power to make such promises to employees should have been expected not to preclude the deal but at most require a minor adjustment in other deal terms.”
Reuters reported that, in April 2022, Twitter CEO Parag Agrawal reassured employees there were no plans for layoffs, while Twitter’s board chair told them that the agreement prioritized “operating continuity.”
[Note: The board chair’s comment wasn’t misleading. Twitter appears to be operating just fine with half the staff it had pre-takeover.]
Was Twitter required to take steps to alleviate or lessen the pain of impending post-deal layoffs? No. But it was hypocritical of them not to.
People First, My Foot
This was the company, remember, that had a webpage dedicated to “Tweep Life” that claimed “We put people first. Together we’re creating a culture that’s supportive, respectful, and a pretty cool vibe.”
The company’s careers page told prospective employees “we take care of the whole you—from physical and mental to financial and professional. So no worries, we got you.”
So much for that promise. Overall, the authors of the study conclude that:
“The Twitter deal suggests that the importance attached to purpose and mission statements is misplaced. Twitter’s corporate leaders had long engaged in pro-stakeholder rhetoric regarding the company’s mission and purposes. Nonetheless, they disregarded these statements and attached little if any weight to protecting the mission, purpose, and core values to which they had publicly been committed to.”
Musk Drove The Bus
For his part, Elon Musk didn’t do much to help the plight of Twitter employees—laid off or retained. According to the academic study:
“Employees who used to work from home before the acquisition were reportedly also targeted for the layoffs. Musk allegedly declined to accept a suggestion from Twitter executives to conduct a diversity and inclusion assessment to ensure the cuts would not disproportionately affect people of color.”
After the deal was completed, Musk mandated 80-hour work weeks from Twitter employees and required them to be in the office at least 40 of those hours. Exceptions would require Musk’s personal review and approval.
A few weeks later, Musk required Twitter employees to commit—via a Google form—to staying with the company with the understanding that they would have to work long hours at high intensity or leave the company.
Paying The Fare On The Musk Twitter Bus
Did Musk really run over Twitter employees who were thrown under the bus or did he just charge them a steep fare to get on it?
Not too long ago, it wasn’t unusual for people building a new company or even a new career to put in long hours (lawyers and Wall Streeters will back me up on this one).
So was Musk really wrong in asking for commitments to hard work (I shudder at the thought)?
Perhaps the bigger problem—and impetus for Musk’s actions—was Twitter’s management team’s inability to efficiently manage its workforce and their proclivity to coddle Tweeps with feel-good bromides that were never realistic.
Stakeholderism Beyond Twitter
Stakeholderism—the idea that corporate leaders should look beyond shareholders and strive to serve all of a company’s stakeholders (e.g., employees, community members, etc.)—has gained currency over the past few years.
Critics of the trend point out that corporate leaders often have incentives to not protect stakeholder interests beyond those that also serve shareholder interests.
Twitter and Elon Musk did stakeholderism a disservice.