Selling Censorship: Could the Twitter Board Trigger Shareholder Lawsuits Over ESG and Anti-Free Speech Policies?
S E E D E D C O N T E N T
Last week, Twitter's Chief Executive Officer Parag Agrawal sounded more like Ukrainian President Volodymyr Zelenskyy in rallying his troops to defy the existential threat of Elon Musk while pledging that they will not be "held hostage." The threat, however, was not a private buyout but the threat that Twitter might be forced to respect free speech on the site. The problem for the Board members is that they could find themselves in court if their anti-free speech stance continues to stand in the way of shareholder profits. Such a lawsuit could be a bellwether for shareholder opposition to boards pursuing Environmental, Social, and Governance (ESG) policies over profits.
The Board responded to the Musk offer with what sounded like a suicide pact to swallow a "poison pill" to sell new shares to drive down share values. While a standard tactic to fend off hostile takeovers, Twitter made it clear that it would not be forced into free speech after making the company synonymous with censorship.
They were joined by liberal commentators who declared that it was not just Twitter but democracy itself that could fall if free speech were allowed to breakout. The Washington Post's Max Boot declared that "for democracy to survive, we need more content moderation, not less."
Former Clinton Labor Secretary Robert Reichwent full Orwellian in explaining why freedom is tyranny. Reich insisted that "every dictator, strongman, demagogue and modern-day robber baron" pushed free speech to oppress people and that, while good for Musk, "for the rest of us, it would be a brave new nightmare."
Twitter CEO Parag Agrawal has maintained that he wants to steer the company beyond free speech and that the issue is not who can speak but "who can be heard." The question, however, is whether shareholders will be heard by a Board that has decided to make censorship (or "content modification") a critical goal of the company.
As I discussed earlier, boards are legally obligated to act in the best interest of shareholders. That fiduciary duty has long been ignored as Twitter undermined its own product by writing off conservatives through openly biased censorship. The managers and employees seem to view the company as a vehicle of their anti-free speech values despite artificially driving down users who have either been banned or deterred by its intolerance for dissenting views.
This fight is coming at a time when many academics are questioning the traditional view that boards and management should be committed to the overriding purpose of maximizing value for shareholders." Rather they argue that corporate figures should focus on advancing Environmental, Social, and Governance (ESG) principles. The result can be aligning corporate identity with controversial political positions like Disney's recent opposition to the Florida's parental rights bill on education, a move that has led to boycotts and possible retaliatory legislation. Such political agendas come at a cost and some shareholders may allege that they are being asked to effectively bankroll the social or political agenda of corporate officials.
The company has long been criticized under Agrawal for pursuing a woke agenda over corporate advancement. There is little cash flow or monetization of sale growth at Twitter with forecasts of sales rising to $1.23 billion while the company posts sharply declining earnings.
Now a whale comes along with an offer of $54.20 a share (54 percent premium over the share price before Musk invested in the company). The Board's response is to pass out the poison pills. The question is whether this is a standard maneuver to force negotiations or whether the company would prefer taking losses for shareholders over allowing greater freedom for users.
ESG policies have already led to litigation, including shareholder demands for greater transparency or ESG commitment from companies. Conversely, shareholders could argue that the political views of corporate officers are being pursued over the profits of the company.
Such lawsuits on both sides can be difficult. Shareholders may allege a breach of the "duty of loyalty," but must show that the officials acted in a self-interested manner or in bad faith. Alternatively, they could argue a breach of the "duty of care," which requires a showing that the officials acted in a grossly negligent manner.
Twitter may be getting precariously close to such a breach if Musk improves his offer as the Board continues to pass around the poison pills.
For Twitter employees, there is a sense that they actually might prefer corporate suicide than protect free speech.
Employees panicked at the very thought of Musk bringing free speech back to Twitter. In Twitter's headquarters in San Francisco, employees are reportedly so traumatized that leadership had to offer emotional support to just "get through the week." One employee decried that such a takeover would be "horrifying for the company's reputation."
Another employee complained that "Hey this is a focus week at Twitter, this is not helping," referring to weeks where employees are given time off to "focus" on projects. Apparently, the last thing that employees want to focus on is free speech.
The tweets make it sound like Twitter employees are the modern equivalent of the defenders of Masada, the Jewish fighters who chose mass suicide over capture by the Romans in 73 C.E. Of course, shareholders may not be as eager to embrace financial suicide. Moreover, when it comes to free speech, Twitter is the encircling hostile army. This is like the Roman army threatening suicide.
That is why this fight could prove so important. Twitter's CEO and Board decided a long time ago to pursue woke policies over profits. They are selling censorship to a public that wants more free speech. They are not alone. Facebook is actually running commercials trying to convince people to embrace censorship as a new generation that wants their views modified by corporate guardians.
Yet, there has never been a bull market for selling censorship. Musk could now force a showdown on whether companies are captive to the management or whether the company can be forced into greater profits even if it comes at the "horrifying" cost of allowing free speech.
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Thoughts from our favorite Law Professor.
Your and your multitude of readers' favorite law professor maybe.
"The Washington Post's Max Boot declared that "for democracy to survive, we need more content moderation, not less."
This sounds like something that Hitler or Stalin would have approved of.
The Founders would be appalled at this assault on the freedom of speech.
A threat to an authoritarian regime is much different than a "threat to democracy."
Max boot might rival Jennifer Rubin for insane histrionics.
Lol ...... the snowflakes are melting. The snowflakes are melting!
Hilarious!
OMG the horror of opposing positions!!!! Must be traumatic as hell for the little wieners ..................LMMFAO support? hahahahaha
Some people just can’t appreciate genius.
And we know who the majority of those are...........................
Good morning Jim,
I don't know who "we" are but I do know that the "majority of those" are on all sides of the political spectrum in equal proportions.
Good morning.
We in this case was Sparty. Surprised you didn't see whom I was responding to. And you are correct. I didn't designate any "side". Pretty much snowflakes of all shapes and sizes.
Well and the mouse I have in my pocket ....
Only anarchists, paedophiles, psychopaths and nits want the sites they frequent unmoderated. Not the users, not the advertisers and not the owners who have rights too. The idea that major gazillion dollar publicly traded social media platforms are going to allow themselves to be dictated to is preposterous!
Moderation or censorship?
Talk amongst yourselves ......
The people invested in biased moderation that benefits them are very afraid it might be taken away.
Censorship is the government controling speech. Editorial control of content is about platforms deciding what fits for their outlets.
Then that is probably why I had thirty eight comments removed here in March alone...
Well, that explains why Facebook and Twitter banned all sharing of the October 2020 NY Post exposé article regarding Hunter Biden's laptop from hell! It only took the NYT and WaPo 18 months to finally admit that the article and subsequent articles were factual.
Should be a lot more, considering all the rubbish you publish
Free speech is easy as long as you agree with it. It only gets difficult when you don’t.
A concept many, many people have trouble grasping.
And if someone like Jefferson made the exact same comments you did from a right wing perspective, he would have had 75 comments removed and been suspended multiple times.
Balderdash....... free speech is free speech. Platforms like Twitter can’t claim to be for free speech and still target censor what is and isn’t allowed like they are prone to do.
Sure, they are free to “moderate” what they choose but saying they support free speech? Nope, can’t pick and chose in a biased manner like they do.
That said, I hope Twitter likes titty twisters. Musk is giving them one right now ...... with a swirly chaser .....
The real question is at times, is there a difference?
How profound!
Thx, that means a lot coming from my new bestie.
That is the bottom line in every moderated platform…
Exactly! So very well stated and right on!
No one is talking about moderating a site. Twitter and Facebook have been proven to be biased CENSORS. Big difference!
Do the WST or Fox News allow my editorials?
Since I do not know the name(s) under which you publish original articles, I have no way of knowing if they do or don't. Btw ... what's the WST?
[Deleted] Far rightwing media like Fox News cannot be forced to televise, publish, print or give a platform to liberal opinions any more than The New York Times can be forced to print the opinions of Alex Jones, or anyone elsefor that matter! You know this and I know this. So, how about you not playing games?
How about giving a direct reply to my comment 4.2.2 instead of deflecting with personal attacks ?
That is about what I expected out of you...
A man who lied to the public 30,000 times (many of them on twitter) wants to be allowed back on twitter.
Slam the door in his face without the slightest hesitation.
Yeah, why the fuck would a company allow that shitstain back when he continually violates their policies?
Free speech my big fat ass!
I will not argue your last point with you at all!
Oh no!!!! A politician lies!!!! Oh the humanity!!!!!!
I’m all in favor of giving Twitter only two choices, allowing free speech as Musk envisions or corporate suicide where they cease to exist at all. They should have no other option. I intend to use my shares to aid either option. I’m buying Tesla too to give him more operating capital for this…I’m hardly alone. Rule em or ruin them. Free speech or bust.
If you are buying Tesla stock it is from someone who is selling it and the odds of that someone being Musk are highly negligible.
That’s not the point. By buying more Tesla and its stock value it gives Musk more capital to use or borrow against to carry out his hostile takeover of Twitter on behalf of free speech.
She just got Musk’d .....
She must have heard that Musk actually makes you work to earn your paycheck. In my opinion the reason why the Board is fighting this takeover is they know damn well if Musk is in, they are out and they want to keep riding the gravy train.
Twitter employees seem to be overly sensitive children. Even before Musk's offer that triggered them, they enjoyed a "monthly day of rest".
https://www.bloomberg.com/technology
Most of us call that a weekend.
I can't begin to imagine how Twitter's and other social media snowflakes could have possibly survived during my grandparents' and parents' small business owner decades - 60 hour work weeks (M-S) with customers having the audacity to call them on Sunday afternoon because they "forgot" to pick up their supplies on the 6 days that our store was open. Since that time, I've sadly learned that those customers were Democrats. Some things never change!
A real weekend was a luxury for my family.
These people can't survive an opposing opinion let alone actually having to work more than 15 to 20 hours a week.
In a way this is when I wish military service was mandatory like many other countries. Instill some discipline in them.
Lol ..... bazinga!