糖心视频

The past week and half has seen a raft of back-and-forth news regarding and : Elon became the largest outside shareholder (but it鈥檚 a passive investment! Elon鈥檚 joining the board! Actually, Elon鈥檚 not joining the board!)

The latest development, of course, is that the CEO isn鈥檛 joining the Twitter board after all. The social media giant鈥檚 CEO, , said Sunday night that Musk declined the board appointment Saturday, the same day it was set to begin. And on Monday, Musk amended his filing with the to become an active investor in the company.

The whole saga got me thinking about public company board appointments and Musk鈥檚 possible motivations to join Twitter leadership. So, I chatted with Aron Solomon, a lawyer who鈥檚 taught entrepreneurship at schools including and , to learn more about how atypical the Twitter situation with Musk is.

How board appointments work

Public company boards work a little differently from those of private companies, since they have to adhere to SEC and other guidelines. Public companies headquartered in California, for example, must have at least one woman on the board of directors.

鈥淕enerally, somebody gets on a public company board because they seem to have expertise, governance skills that they can bring, some kind of representation to the board that hasn鈥檛 been there,鈥� said Solomon.

The majority of the directors on the board need to be independent, meaning they don鈥檛 have a sizable stake in the company, didn鈥檛 work there in the past five years, and don鈥檛 have family ties to the company, according to Stefano Bonini, an associate professor at 聽in Hoboken, New Jersey, whose research has focused on corporate finance and venture capital.聽

Independent directors are compensated for their position, and generally come from the same industry as the company in question or have relevant business or regulatory experience.聽

While board members are typically selected during a shareholder meeting and are nominated by a nominating committee within the company, there鈥檚 nothing to prevent a shareholder from making a nomination.

鈥淚n this case, the fact that Elon bought a stake in Twitter didn鈥檛 involve, per se, any direct implication on his appointment as a director,鈥� Bonini said. 鈥淵ou can have 50 percent of a company and have zero representation on the board. It鈥檚 possible. Now, is it common? No.鈥澛�

Large shareholders are often appointed to boards, as we frequently see with private companies. Funding round announcements, for example, often contain the news of a new major investor joining the company鈥檚 board of directors.

Musk鈥檚 appointment to Twitter鈥檚 board of directors came with the caveat that he couldn鈥檛 own more than 14.9 percent of the company or take it over.聽

It鈥檚 also not uncommon for large shareholders to join a company鈥檚 board of directors, though the threshold is often higher than a 9.2 percent stake, as Haas School of Business lecturer Deepak Gupta pointed out to me previously.聽

Now that Musk won鈥檛 be serving on the board, that share cap doesn鈥檛 apply to him, Solomon noted. In theory, he could own a controlling interest in the company and push for change. Notably, Musk filed the necessary paperwork amending his status to active investor.

Going 鈥榦verboard鈥�

A recurring issue in corporate America鈥攁nd something Solomon suspects was on the minds of everyone involved in the Musk-Twitter saga鈥攊s the idea of overboarding, or people serving on too many boards simultaneously.

鈥淚f you look at somebody like Elon Musk, I think it鈥檚 very, very clear that he鈥檚 already overboarded,鈥� Solomon said. 鈥淣umber one, he鈥檚 running his own companies.鈥�

Musk is the CEO of Tesla and , and the founder of and . He鈥檚 a busy guy, no doubt.聽

In the case of Twitter, overboarding seems to be an issue the company is particularly sensitive about, given its past history of former CEO also being the CEO of , another public company.

鈥淭he biggest criticism you saw of Jack Dorsey in running Twitter was that he was divided in running Square and running Twitter,鈥� Solomon said.

Activist investor , for example, pushed for Dorsey鈥檚 ouster back in 2020, pointing to the founder鈥檚 divided attention between two public companies as a reason for some of Twitter鈥檚 woes.

Executives of public companies frequently serve on other boards鈥攊n fact, some are required to serve on nonprofit boards as part of their contract; that鈥檚 why you鈥檒l sometimes see CEOs on the board of trustees of their children鈥檚 private schools; not only do their kids go to school there, but they have a contractual obligation to serve on a board.聽

To Solomon, it seems like Musk鈥檚 endgame was likely to take a controlling interest in Twitter鈥攕omething he couldn鈥檛 do while serving as a board member.

鈥淗e鈥檚 probably thinking, 鈥業f I can have a controlling interest in the No. 1 social media outlet, it could benefit me in a lot of ways,鈥� 鈥� Solomon said.

Bonini echoed that thought. 鈥淚 think he has a view that rather than build a new platform from scratch, he might add value by bringing new ideas to the company, kind of like becoming a factor of change. That鈥檚 all I can think of in the ultimate intentions of buying such a stake.鈥�

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