Local lawyer takes on Twitter over layoffs

I doubt that Elon Musk, with his access to legal expertise, will do something rash or dumb here.

My guy - the dude overpaid for the whole company because he signed the contract on a whim without doing due diligence and then discovered that surprise, they wouldn't let him back out of it. He's been live on Twitter trying to negotiate with celebrities about how much he can charge for verification while they tell him he's being an idiot. This entire thing has been nothing but rash and dumb on his end.

edit: looks like my post didn't work correctly (probably because I pasted an emoji), but it was this tweet:
https://twitter.com/CaseyNewton/status/1589075543420325888

"Multiple sources and Twitter Blind chats now saying that the company has begun to reach out to some people it laid off yesterday asking them to come back. Whoops!"

Everything Elon does is rash.

Here's a very long quote from Matt Levine in his last week talking about just how rash this is, and also why golden parachutes exist.

Parag Agrawal has an employment agreement that says he gets a huge bag of money if (1) Twitter is acquired and (2) then he is fired.[3] He has been CEO for less than a year and stands to make tens of millions of dollars. Why did Twitter’s board agree to this deal? Why does almost every public company agree to that deal?

The answer is that sometimes public companies would be better off getting acquired, but that would rarely make their CEOs better off, unless they got paid. Earlier this year, Parag Agrawal had a good job as CEO of Twitter. He got paid well, he got to boss people around, it was nice. Then Elon Musk came along and said, more or less in so many words, “I want to buy Twitter and fire the CEO as rudely as possible.” Agrawal might quite reasonably have said, no, I like my job, I like getting paid, I like being the boss, I don’t like people being rude and firing me. And then, as the CEO of Twitter, he could have tried to prevent the merger. It might not have worked: Musk could have (and almost did) put in a hostile bid to try to buy Twitter without the CEO’s approval; hostile bids do sometimes succeed. But in general if a CEO wants to block a deal, that makes it harder to do the deal.

But the deal was clearly (especially in hindsight) really good for Twitter’s shareholders: They got $54.20 per share, which is way more than the shares would otherwise be worth. And Twitter’s board had set up incentives so that, if a deal came along that was good for shareholders but bad for Agrawal, Agrawal would say yes. The incentive is that Agrawal would get fired rudely, but he’d get a big check to make up for it. I once wrote about the general theory:

CEOs tend to receive whomping great “golden parachutes” for selling their companies, even if they’ve only been there a short time and haven’t done a very good job. Every time this happens, people complain about it, but you shouldn’t think of the golden parachute as a reward for being the CEO. It’s an incentive to stop being the CEO: If the CEO knows he’ll get paid $100 million for quitting in a merger, that might overcome his natural aversion to doing the merger.

Here, the golden parachutes worked perfectly. Agrawal and his management team clearly did not like Musk or want him to buy the company, and they clearly knew he would fire them, but they negotiated a deal with him anyway, because it was in the best interests of shareholders. They put shareholder value above their own careers and interests, perhaps because they are noble people who love shareholder value, but perhaps also because they stood to get huge bags of money as a reward for this sacrifice.

And then he tried to get out of the deal! Elon Musk, a semi-hostile acquirer who clearly had it in for Agrawal et al., was like “okay never mind, not gonna buy Twitter.” They could have let him walk! They could have said “okay he doesn’t want to buy Twitter and we don’t want to work for him briefly before he fires us, so this worked out great for us, bye Elon.” But instead they sued to force him to close the deal, and dealt with a lot of stress and online abuse, even though Musk didn’t want to buy Twitter and they didn’t want him to buy Twitter. But they got it done anyway, because their shareholders wanted Musk to buy Twitter, and they were working on behalf of the shareholders. And because they were incentivized, by their severance payments, to do that.

Let’s say Musk is entirely right that “Twitter has been mismanaged and that if it were not for his bid, the value of the company’s stock would have collapsed.” That is why the golden parachutes are there! If Twitter was managed great and worth more than his bid, he wouldn’t have bought it, and they wouldn’t need severance! And anyone can mismanage a company and drive down the stock price and then not sell the company to keep drawing a salary. Agrawal et al., let’s assume, mismanaged Twitter and drove down the stock price, but because they were good stewards of shareholder value, they nonetheless managed to get a ton of money for shareholders. They have to be rewarded for that!

The basic problem with Musk’s efforts to walk away from his deal to buy Twitter — beyond the transparent nonsense of his actual arguments — was that if he could walk away from this deal then no merger agreement would be binding; every buyer could change their mind and go to court and say “meh, contracts, they don’t matter.” That did not work out for him; the system held.

The basic problem with Musk’s efforts to walk away from these severance agreements — beyond the lack of actual arguments — is that if he can stiff these executives then no golden parachute is binding. The point of a golden parachute is that a CEO with a golden parachute will sell his company to a buyer whom he doesn’t like, if that’s what is best for shareholders. If the buyer can stiff the CEO on the parachute payments because they don’t like each other, then no buyer will ever pay severance, and no CEO will ever trust it.

The questions asked during that messy little conference have been around for years. Anybody who knew what needed to be said or done had plenty of time to study up.

Musk is just a frontman for toxic masculinity and special rich boy stupidity. He has no clue how to even get a clue.

Meanwhile, those of us with personal ties to places that are getting that ad money are hardly "going broke". Lol.