Members Only | February 16, 2023 | Reading Time: 4 minutes
Nice words are nice
Corporate leaders say they care.
Corporations want you to think they care about more than profit.
In 2019, 181 CEOs signed a much-touted statement declaring they’d lead their companies not just to maximize shareholder takeaway, but to benefit “all stakeholders — customers, employees, suppliers, communities and shareholders.”
Nice words are nice.
In practice, there’s little reason to think corporations will protect the interests of employees or the public when real cash is at stake.
Primarily, about money
That’s the conclusion of a new paper released last week by Harvard scholars Lucian A. Bebchuk and Anna Toniolo, and Kobi Kastiel of Tel Aviv University.
Called “How Twitter Pushed Stakeholders Under the Bus,” it focuses on Elon Musk’s takeover of the social media company.
That takeover made Twitter shareholders and managers a ton of money at the expense of Twitter’s employees and virtually all its stated moral commitments.
The authors conclude those moral commitments weren’t worth the bytes they were printed on.
After much legal wrangling, billionaire Tesla CEO Elon Musk purchased Twitter for $54.20 a share in late 2022. That was a significant premium over the pre-acquisition stock price of $39.31 a share.
Shareholders made a bonanza.
Fast Company suggested that Vanguard Group made around $4.5 billion; Morgan Stanley made $3.6 billion; and BlackRock got somewhere around $2.8 billion.
Twitter’s officers also had huge takeaways.
Omid Kordestani, executive chairman, took home $50.6 million. Former CEO Parag Agrawal made $7 million. (Musk is fighting his $38.7 million severance package.)
Twitter’s former general counsel Vijaye Gadde received $32.8 million.
Bebchuk, Kastiel and Toniolo estimate the deal produced about $93 million for other non-executive Twitter directors.
That’s a lot of money.
But, as the paper points out, Twitter often claimed the company was not just, or even primarily, about money.
Stakeholders and the bus
For example, Twitter’s employee career pages say, “We put people first … Together, we’re creating a culture that is supportive, respectful and a pretty cool vibe.”
Twitter touted itself as a responsible civic actor. It was committed, it said, to preventing hateful conduct and threats of violence.
And it was committed to election and civic integrity.
Or as the company’s page, on the topic, said, “We’re working to prepare for elections, elevate credible information and help keep you safe on Twitter.”
Employees, users, and society are stakeholders. They are central to the business and care about the business, but they don’t own it or directly profit from it.
Over the past 20 years or so, some scholars have argued that companies are dependent on stakeholders for value. They’ve suggested that managers making big decisions — like selling the company — should, and do, take stakeholders into account.
But Bebchuk, Kastiel and Toniolo point out that stakeholders were not considered during the Twitter deal. Executives made no effort to write in protections. They did not write in that employees would get guaranteed increase severance in case of layoffs.
“Not only did Twitter not negotiate explicitly for protections for laid-off employees in the acquisition agreement,” the authors write, “but it appears that they even avoided discussing the subject with Musk.”
Not even verbal promises
Nor did they write in guarantees to protect workers’ rights to remote work or to protect their salaries. Twitter executives didn’t get verbal promises on these issues.
So when Musk laid off 50 percent of the workforce in a brutal and impersonal manner, ended remote work and effectively cut employee compensation by demanding longer work hours, employees had no recourse.
Similarly, Twitter executives made no effort to force, or even ask, Musk to keep the company’s commitments to its users or to civil society.
Musk made it clear he would reinstate the Twitter account of former president Donald Trump; Twitter removed the account because Trump had used it to plan and encourage a violent insurrection, violating Twitter’s ban on violent threats.
Twitter did not have to choose between gobs of cash for shareholders and protecting employees and core values. It had room to negotiate.
It could have set aside funds for employees or given employees power to enforce contractual rights. It could have asked Musk to make some verbal promises about how he’d treat employees or how he’d handle hate speech.
But Twitter did none of that.
When Musk dangled the money, as Bebchuk, Kastiel and Toniolo say, Twitter threw its employees, its morals and its stakeholders under the bus.
“Our study of the Musk-Twitter deal suggests that the importance attached to purpose and mission statements is misplaced,” the authors say, drily.
Evil unless forced
Corporations cannot be trusted to care for employees or society.
Rather than relying on companies to not be evil out of the goodness of their hearts, stakeholders need to force them to fulfill obligations.
Calls for Twitter employees to unionize before the takeover look painfully prescient. Unionization can be risky in the face of corporate opposition. But it’s difficult to imagine Twitter’s workers being worse off following a unionization drive than they are now.
The fact that corporations simply do not care about stakeholders is also an argument for more and stricter government oversight — and for an economy that doesn’t funnel so much cash and power to the wealthiest.
Corporate leaders will say they care about workers, the environment, civil society and fighting racism. But the evidence suggests they’re lying.
Labor power and democratic checks are the only thing that will force the wealthy to care about anything but their own wealth. Left to their own devices, corporations and the plutocracy will do to everyone what Musk and Twitter’s former management conspired together to do to Twitter.
Noah Berlatsky writes about the political economy for the Editorial Board. He lives in Chicago. Find him @nberlat.