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Elon Musk challenged Twitter executives aligning with shareholders at the weekend, citing most of the board’s small personal stakes in the social networking company. The businessman and the richest man in the world offered to take full ownership of Twitter last week, to which the company’s board responded with a defense with a poison pill. “Wow, with Jack leaving, the Twitter board (ie: TWTR) has collectively held almost no shares!” Musk wrote on Twitter on Saturday. “Objectively, their financial interests simply do not align with the shareholders.” Some research has shown that companies whose board members hold relatively more shares outperform those whose directors have a smaller stake in the business. This conclusion certainly has an objective meaning: A greater financial incentive should translate into a greater effort by a board member to make his or her company successful, assuming he or she is qualified and capable of serving the role. On the other hand, it is also worthwhile to have independent voices on a board of directors and directors who do not have a long history with a company. Call it a new perspective. They can be given shares when they join a company or – even better – buy them with their own cash. Managers are also well paid for their participation on a board, usually with a combination of cash and shares and limited shares or RSUs. Their stocks should increase as they sit on a board. In the case of Twitter, executives receive $ 225,000 in limited shares, plus at least $ 50,000 in cash, annually. Below is the board of directors of Twitter and each of its positions in the company, based on the latest proxy statement of the company or the financial disclosures of individual directors, whichever is more recent. Bets may include common stock and RSU. DirectorYears on BoardNumber of shares (thousands) Recent value (thousand)% OwnershipJack Dorsey1518,042,4 $ 847,9932.363% Omid Kordestani7934,2 $ 43,9070.122 $ 43,9070.122% Parag.600 $ Bret Taylor (Chair) 656,6 $ 2,6600 007% Martha Lane Fox632,5 $ 1,5280,004% Patrick Pichette524,8 $ 1,1660,003% Robert Zoellick421,5 $ 1,0115,003 $ 1,0110,003% F. AlemayehouLess than $ 13.7 1740,000% Source: company / manager deposits According to Musk, the vast majority of Twitter’s board ownership is in the hands of co-founder Jack Dorsey – about 2.4% of the company – compared to about 2.6% owned by the entire board, including Dorsey. Tesla (TSLA), which holds its annual meeting in the fall, last issued a power of attorney statement owned by board members in August 2021, based on their availability at the end of June. Some executives have revealed trades since then, including Musk’s December sales turmoil. Here are the shares of Tesla executives in the company when their RSUs are included. (Thousands) Recent Value (Thousands)% Ownership (Thousands)% Ownership Value (CEO) 18231,715.2 $ 231,251,77273,548% Larry Ellison415,228.5 $ 15,198,0431,548% IRA EHRENPREIS15858,8 $ 857,0820 , 087% Kimbal Musk18797,0 $ 795,3960,081% Robyn Denholm (Chair) 8726,7 $ 725,2060,074% James Murdoch5474,1 $ 473,1520,048% Kathleen Wilson-Thompson4206,0 $ 205,5600,021% Hiromichi, 2116.26% Mizuno Source: company / manager deposits As expected, Musk dominates the capital table, with common stock accounting for about 17% of the company and options that would raise ownership to about 23.5% when exercised. Oracle co-founder (ORCL) and Tesla’s first loyalist, Larry Ellison, is next, with about 1.5% stake. The other six Tesla executives own about 0.3% of the company together. In percentage terms, this is not so different from the Twitter table. But it’s a much, much more valuable company — 0.01% of the company owned by Tesla CEO Hiromichi Mizuno is worth more than $ 100 million, compared to the same-sized share of Twitter CEO David Rosenblatt about $ 5 million. And Mizuno is the least invested in Tesla of the company’s board. On Twitter, seven of the 11 executives have shares less than 0.01% of the company. Barron’s has examined board ownership in several large high-tech companies, including Facebook’s parent Meta Platforms (FB), Apple (AAPL), Salesforce (CRM) and PayPal Holdings (PYPL). In most cases, the founders held the vast majority of shares among executives, some early and long-term investors had fairly large shares, and younger, independent directors were barely listed on the chart. Companies without founders on their boards may have very little ownership on the board – all PayPal executives together hold less than 0.1% of the company’s shares. This makes low Twitter ownership the rule, not the exception. Musk made a fair point with his tweet — but what applies to most major tech companies in the market, not just Twitter. Write to Nicholas Jasinski at [email protected]
