February 8, 2023

Volume XIII, Number 39

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February 07, 2023

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February 06, 2023

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"The Horror! The Horror!" - Scholars Accuse Twitter Directors Of Putting Stockholders First!

In a forthcoming case study, three scholars advance the accusation that when negotiating the sale of Twitter to Elon Musk, Twitter's leaders "chose to disregard the interests of the company’s stakeholders and to focus exclusively on the interests of shareholders and the corporate leaders themselves".   Lucian A. Bebchuk, Kobi Kastiel, and Anna Toniolo, How Twitter Pushed Stakeholders Under The Bus.  The authors do not argue that Twitter's leaders violated their fiduciary duties.  Rather, their complaint focuses on the fact that fulfilling those duties was at odds with "pro-stakeholder commitments that Twitter consistently proclaimed prior to entering the Musk deal".  

This should be no surprise.  Delaware law permits directors to consider stakeholder interests only to the extent that those interests advance stockholder interests.  As former Delaware Chief Justice Leo Strine, Jr. has explained:

[A] clear-eyed look at the law of corporations in Delaware reveals that, within the limits of their discretion, directors must make stockholder welfare their sole end, and that other interests may be taken into consideration only as a means of promoting stockholder welfare.

 The Dangers of Denial: The Need for a Clear-Eyed Understanding of the Power and Accountability Structure Established by the Delaware General Corporation Law, 50 Wake Forest Law Review 761,768 (2015) (emphasis added). 

© 2010-2023 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XIII, Number 25
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

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