Friday, April 22, 2022
I guess we’re talking about Elon Musk again.
If you’re like me, you’re kind of gratified by the general public’s new fascination with corporate law, but, of course, to those of us who live here, it’s obvious that while all of the maneuvering so far is colorful, it’s bog standard legally, and the Twitter board’s actions in adopting a poison pill were not only totally unremarkable, but arguably necessitated by their fiduciary duties. (So that they would have time to explore other alternatives; so that they could assess the seriousness of Musk’s offer and attempt to negotiate a higher one; so that they could prevent Musk from obtaining control – or sufficient control to block superior alternatives – simply through open market purchases, etc). Nonetheless, that has not prevented a lot of people who should know better from saying silly things:
Twitter enacted poison pill; our thoughts-TWTR going down the poison pill path is a predictable defensive measure for the Board to go down that will not be viewed positively by shareholders given the potential dilution and acquisition unfriendly move. Likely challenged in Courts— Dan Ives (@DivesTech) April 15, 2022
If the current Twitter board takes actions contrary to shareholder interests, they would be breaching their fiduciary duty.— Elon Musk (@elonmusk) April 14, 2022
The liability they would thereby assume would be titanic in scale.
(for that last, maybe Musk is thinking of his own potential exposures for fiduciary duty claims)
That said, it cannot be denied that the issue of Musk’s potential control of Twitter – and the changes he may make to content moderation – are of great political importance. Musk has suggested that he would like to loosen content restrictions, and several conservatives, who argue that their views are censored on Twitter, have cheered Musk’s proposal for that reason alone. Ron DeSantis, who has been aggressively leaning into the culture wars, has gone so far as to declare that not only has the Twitter board violated its duties by resisting Musk’s proposal, but that he hopes to cause Florida’s state pension fund – which is invested in Twitter – to sue.
All of which spotlights a couple of fairly basic things about corporate law, but they are worth teasing out.
First, corporate law matters for reasons that go beyond finance; for good or for ill, whoever has control over Twitter will also have a great deal of control over the global political discourse. That inescapable fact makes the argument for shareholder primacy – that corporate law should only concern itself with investor welfare – ring somewhat hollow.
Second, though, and in some degree of tension with the first, I’ve joked here before about Delaware controlling the world, but part of the reason that academics and others have tolerated and/or championed Delaware’s outsized influence is because it’s probably the closest thing we will have to a neutral. It would go too far to say Delaware law is apolitical – it does, in fact, have a shareholder-centric focus, which elevates capital above other constituencies – but we can trust that whatever disputes arise over Musk’s bid for Twitter, they will be litigated according to familiar legal standards that were not developed to appease any particular constituency on the right-left spectrum.
Update: And now congressional Republicans are demanding that the Twitter board preserve all communications pertaining to Musk’s offer, which... pretty much proves my point.