5/21/2022

How Elon Musk and Jack Dorsey Aligned Behind Twitter Deal

Financial Times (05/21/22) Murphy, Hannah; Criddle, Cristina

The close relationship between Twitter (TWTR) co-founder Jack Dorsey and Elon Musk, who has made an offer to take Twitter private, has shaken up the future of the social media company. The pair’s alliance has fueled speculation about whether Dorsey might play a key role in the company if a deal closes. Regulatory filings from last week revealed that after Musk was first invited to join Twitter’s board in early April as a major shareholder, Dorsey “shared his personal view that Twitter would be better able to focus on execution as a private company." Dorsey quit as Twitter’s chief executive last November but still remains on the board. According to insiders, the advice stemmed in part from growing tensions between Dorsey and fellow Twitter board members over how the company should be run and issues including content moderation. In the past, he had clashed in particular with Elliott Management, which previously held a seat on Twitter’s board. Dorsey saw the fund as too commercial and focused on the short term, according to several people. Some board members, meanwhile, grew increasingly frustrated by what they perceived as Dorsey’s lack of engagement. Just a week after Dorsey said Twitter would be better off if taken private, Musk announced his plans to do just that. Upon the board agreeing to the takeover, Dorsey tweeted: “Elon is the singular solution I trust. I trust his mission to extend the light of consciousness.” Dorsey felt personally challenged by Elliott, which took a board seat at Twitter after investing in the company in early 2020, according to several people familiar with the meetings. Elliott was concerned at the time that Dorsey was distracted by his second chief executive role at payments company Square (SQ), now called Block, and demanded a faster pace of product innovation. Dorsey rejected Elliott as too capitalistic. After the board called on Dorsey to devote his efforts full-time to leading Twitter in the wake of the January 6 assault on the U.S. Capitol last year, he declined and eventually resigned from his position as chief executive. While Dorsey recently said he would never return to the company as chief executive, he has discussed with Musk whether he may continue to “hold equity of the surviving corporation or one or more of its affiliates following the merger," according to Twitter’s regulatory filings.

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5/21/2022

Musk Lashes Out at ESG as the Brand Starts to Lose Its Luster

Forbes (05/21/22) Blackmon, David

After S&P removed Tesla (TSLA) from its S&P 500 ESG Index, Tesla CEO Elon Musk tweeted, “Exxon (XOM) is rated top ten best in world for environment, social, and governance (ESG) by S&P 500, while Tesla didn’t make the list! ESG is a scam. It has been weaponized by phony social justice warriors.” Some other investors seemed to agree. “Ridiculous. Not worthy of any other response,” ARK Invest Founder and CEO Cathie Wood tweeted Wednesday in response to an article detailing the change. Meanwhile, BlackRock (BLK), a vocal embracer of ESG investing, emphasized its apparently revised prioritization of ESG in a letter this month to Texas Comptroller Glenn Hegar. The company was responding to a new Texas law that would require the comptroller to deny any firm that unfairly discriminates against the Texas oil and gas industry the ability to manage positions in Texas pension funds. In a May 13 letter signed by its head of external affairs, Dalia Blass, BlackRock told Hegar that its “investment decisions are governed strictly by our fiduciary duty to clients, and that duty requires us to prioritize our clients’ financial interests above any commitments or pledges not required by law." The reality here, writes Forbes senior contributor David Blackmon, "seems to be that ESG is a classic luxury item, an expensive virtue signal in the corporate world. In that sense, it is little different than Tesla’s pricey cars, in fact. When times are good, it’s easy to focus on luxury items as status symbols, like paying a small army of consultants seven-figure fees to generate you a glossy annual sustainability report, or allocating a larger portion of the funds you manage to investments in companies who sport such reports. But when times get tough and look to likely be getting tougher down the road, the intrinsic value of the luxury item and the opportunity for virtue signaling it represents diminishes and can even become a target for criticism. The events of the past few weeks indicate that this is where the ESG brand is headed for the time being."

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5/20/2022

Even Among Corporate Raiders, Elon Musk Is a Pirate

New York Times (05/20/22) Hirsch, Lauren

In the weeks since Elon Musk struck a $44 billion agreement to buy Twitter (TWTR), he has upended the deals landscape. Musk waived due diligence to get the deal done, according to legal filings. Since then, he has publicly criticized Twitter’s service, attacked some of its top executives, and unleashed tweets taunting the company’s board. He has also appeared to try to renegotiate the deal’s price downward, citing the accuracy of the company's own research on bots. In essence, Musk has turned what was largely a friendly deal into a hostile takeover after the fact, making "past corporate raiders look positively quaint by comparison," writes New York Times columnist Lauren Hirsch. On Thursday, Twitter executives said at a company meeting that Musk’s purchase was moving forward and that they would not renegotiate, according to two attendees. Earlier this week, the company’s board also declared, “We intend to close the transaction and enforce the merger agreement.” Twitter’s board has contended that it has the legal upper hand with the deal. In addition to a $1 billion breakup fee, the agreement with Musk includes a “specific performance clause,” which gives Twitter the right to sue him and force him to complete or pay for the deal, so long as the debt financing he has corralled remains intact. Musk has already pushed some legal boundaries. The U.S. Federal Trade Commission is looking into whether he violated disclosure requirements by failing to notify the agency that he had amassed a sizable stake in Twitter earlier this year, said an insider. "Musk seems free to do as he pleases with deals partly because of his extraordinary personal wealth, with a net worth that stands at around $210 billion and that lets him ignore a deal’s economics," says Hirsch. "And unlike a private equity firm, he does not buy multiple public companies a year, making it less important to present himself as a consistent closer."

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5/20/2022

Corporate Boards Rebuff Conservative Shareholder Activism

Washington Times (05/20/22) Salai, Sean

The boards of several top U.S. companies rebuffed efforts by conservative shareholders to separate them from woke politics. Investors at AT&T (T), JPMorgan Chase & Co. (JPM), Home Depot (HD), and Mondelez International (MDLZ) opposed conservative-led measures at their annual meetings this week on the recommendations of their boards. Activists from the National Center for Public Policy Research, which acquires stock in U.S. companies through its Free Enterprise Project (FEP), presented proposals at AT&T and JPMorgan Chase this week. One item in the AT&T proxy statement urged having "an independent and unbiased third party" conducting a nondiscrimination audit of the company's Senior Executive Diversity Council and identity-based Employee Groups, which conservatives claim cultivate bias against whites. Investors followed an AT&T board recommendation in the proxy statement to vote against this proposal. "Our philosophy of diversity, equality, and inclusion, and the programs that emanate from that philosophy, encompasses all segments of society, including those who do not identify as racially diverse," says the board recommendation. A proposal in the JPMorgan Chase proxy statement calls for changes in the board of directors' selection process to include members with diverse perspectives. Shareholders defeated the proposal following the board's declaration in its proxy statement that JPMorgan Chase already has "a robust director recruitment process," and that "the Board's recruitment process has resulted in the election of three women directors in the past four years, one of whom is a person of color." Shareholders also repudiated a request from the American Civil Rights Project for managers to retract "up to 10 illegal, racially discriminatory policies adopted by JPMorgan Chase & Co.'s officers and directors" that favor people of color. Meanwhile, the National Legal and Policy Center (NLPC) proposed resolutions that Home Depot and Mondelez require that each CEO be "an independent member of the board" to certify transparency with shareholders about their political activities. "For example, Home Depot will not, as its website claims, have electricity at all its facilities that will be generated 100% by renewables by 2030," said the NLPC's Paul Chesser. Shareholders at both companies rejected the resolutions after their boards dismissed them as unnecessary. Among those concerned about the embrace of progressive agendas at companies is Brad Anderson, co-chair of the conservative Job Creators Network's Boardroom Initiative. "This is a problem that isn't going to end until we can reign corporate boardrooms back in line and make sure they're held to the fiduciary duty they were hired to uphold," he said.

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5/17/2022

In a Hot Job Market, Companies Hand Out Big Awards to Retain Key Executives

Wall Street Journal (05/17/22) Broughton, Kristin

Retention awards, mostly in the form of stock and often worth millions of dollars, are a focus of pay disclosures from large U.S. companies this year amid concerns about the tight labor market. Companies handed out these one-time awards in hopes of retaining high-performing leaders amid record employee turnover and to reward them for managing through the difficult years of the pandemic. Proxy filings show that Coca-Cola Co. (KO), Hewlett Packard Enterprise Co. (HPE), and Tyson Foods Inc. (TSN) are among the companies that provided supplemental awards to senior executives during the 2021 fiscal year. A Wall Street Journal analysis reveals that the median compensation package for CEOs of S&P 500 companies was $14.7 million in 2021, marking the sixth consecutive annual record, with equity awards accounting for about two-thirds of the packages and more for the highest-paid CEOs. At some companies, these stock awards were intended to replace compensation that executives lost early in the pandemic, following efforts in 2020 to reduce executive salaries to demonstrate solidarity with investors and employees amid early-pandemic layoffs. Council of Institutional Investors executive director Amy Borrus said this "throws into question the whole notion of shared sacrifice." Meanwhile, compensation advisory firm Semler Brossy reports that through April 28, say-on-pay proposals this year received an average investor approval vote of 86%.

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