The entire board ex-Jack owns a little more than 1% of Twitter. It sure sounds like their interests are not well-aligned with those of the company owners.
If this is true, can shareholders (if they wanted to) sue the Board for being deaf to shareholder interest? Or just fire the Board and elect a new one?
What I am trying to understand is that – do the shareholders want these people to have cultural power?
if Musk can convince enough shareholders to call a vote they can vote on it directly. so usually the problem is trying to find the shareholders (or their proxies) and convincing them. (for example if half of twitter is owned by passive index funds it might be hard to persuade them to do anything)
I don't completely understand that argument. If a board member owns let's say 0.1 % of total shares, but that represents 90 % of his private fortune, he will be very incentivized to increase the value of the company. On the other hand, if it represents 1 % of his total fortune, I can see the point.
That misrepresents my point. Most people strive to increase their fortune no matter whether it represents a large share of a company's total market value or not. If they have a large stake in one company compared to other investments, then that company represents a larger leverage for them to increase their fortune.
There are many avenues for increasing your personal fortune through influence over twitter other than increasing the value of your shares-- particularly when you own relatively few twitter shares.
>It sure sounds like their interests are not well-aligned with those of the company owners
I don't understand what you mean. Who do you think the owners of Twitter are?
As far as I know, the vast, vast majority of shares are held by "institutions". The top ten funds owning shares in Twitter are index funds that mostly either buy the "total market" or the S&P 500.
If Twitter suddenly and completely vaporized tomorrow, these funds would have about a tenth of a percent headwind for that day. Nobody holding them for retirement would notice.
Really, I think it would make sense to say that the interests of the company owners are not aligned with Twitter.
Which is a good thing if you care about the rest of society and don't, for instance, want to contribute to the destruction of democracy to make a bit more profit.
Twitter doesn’t have interests beyond making a profit. The shareholders of Twitter don’t have interests beyond making a profit. The company’s owners are aligned with Twitter insofar as they both seek maximal return on investment.
Just because the interest of the company’s owners is small does not mean the interests aren’t aligned. In other words, magnitude != direction.
The board of Twitter has maximal power, but minimal interest. The owners of Twitter have minimal power and minimal interest too, relative to their other holdings, but maximal interest relative to the board.
>The shareholders of Twitter don’t have interests beyond making a profit
The shareholders of Twitter generally have 99.9% of their assets in other companies.
Therefore their interest in profits doesn't necessarily translate to an interest in Twitter profits. Even with the most abstract theoretical profit-maximizer model, damaging 99.9% of your investments in favor of 0.1% is not how an entity would act.
This is generally a good thing, but it's also what people are complaining about with the board of directors.
If shareholders and directors are not diversified, then they can make a lot of money through destroying democracy, poisoning rivers, whatever, and then escape to New Zealand or somewhere. You know, "externalities". Monopoly-guy in a top hat.
But if they are diversified, then the profits are not worth it to them, because many of the externalities are now internalized.
According to Twitters latest 14A page 77 all executive officers and directors as a group, ex-Jack, own 2479280 out of 763577533 shares-- including vested options. This is 0.324%.
How does it work with institutional investors? Like, do Vanguard and Blackrock get to assign a board member each to serve their interests indirectly? Perhaps that explains why.
Vanguard and BlackRock are well publicized as having pushed leftist politics through many of their initiatives[0]. The quote, in the article, of
>We vote in accordance with these governance principles to represent the long-term interests of Vanguard fund investors.
would imply that they may vote in ways that forward these leftist initiatives. However, there is no evidence to show that their votes on boards have any agenda beyond profit-maximization.
Blackrock has a strong environmental ESG bent currently. In a binary political system that’s how one of the biggest capitalists in the world get labeled “left wing”.
It’s not “left wing” but rather an effective co-opting of the left wing. It steers the conversation to being about the skin color of the board members and executives and away from the concentrated ownership of corporate shares.
It sounds like a "right wing boogeyman conspiracy theory" but it's absolutely the case. A lot of this woke D&I crap is coming from the top down through these ESG policies. If you want funds from big players, you need to play the game of diversity shenanigans.
Thanks for this. I have funds with Vanguard and didn't realize they went woke while I was not looking. I thought I was passive. Can you recommend some other investment company?
Institutional investors like Vanguard usually just confirm the board in whatever the board is doing. They effectively do NOT "own" the company in a way that would involve them making decisions on it.
Sometimes they pass questions on to the shareholders of the funds, which everyone ignores.
Both of these investors mentioned have “ESG” policies where they will deliberately influence companies to act in certain political ways, rather than purely for the furtherance of the company.
Whether that’s good or bad is up for debate, but the Vangaurds of the world certainly have interests beyond buying and holding all the stocks.
ESG funds are such a scam. They charge high management fees and because of the pressure to deliver market returns (without which almost no one would buy them) they end up owning substantially the same stuff-- when they exclude a company because its this weeks' press whipping boy they replace it with more shares selected to optimize their correlation with the replaced company. Now as always the only lesson to companies is "don't get caught" or "make sure you put a positive spin on it".
I wish they did meaningfully push companies to implement profit incompatible policies-- then at least they'd be interesting to short.
An "interest" seems to me like it has a bit of a connotation beyond a "preference".
It suggests some substantial motivation that I'm not sure ESG policies rise to the level of.
Individuals working for Vanguard have some motivation to talk about ESG and go through the motions.
But at the end of the day, if they buy all the stocks, and if their customers understand that they buy all the stocks, then how can ESG considerations make a meaningful difference in the overall job? It seems way too constrained.
Vanguard, IIRC, buys and manages a portfolio on their user's behalf. Their uses are the ultimate beneficiaries of the stock and can vote the proportional share they own.
