Twitter Deal: Stakeholders’ Interest in the shadow of Shareholders’ Supremacy?

[Priyanshi Jain and Nehal Misra]

The authors are students of Institute of Law, Nirma University.



Elon Musk, governing the tech fiefdom, has recently signed a deal to buy Twitter. The deal has been closed at $44 billion.  Since the finalization of deal a contrasting relationship has been developed between the tech mogul and Twitter. To begin with, he has criticized Twitter’s board over past performances and has even trolled its CEO and lawyers, it is evident that musk is trying to veto the deal in every possible way. Initially, Elon sent an unsolicited offer to acquire Twitter. Pursuant to this, Twitter’s board came up with one of the strongest combative strategies known as the ‘‘poison pill’’. However, the board of Twitter, in a complete reversal of its initial hesitation, has now accepted the bid.  The question which remains unvoiced is how the board of the target company, in one fell swoop accepted the bid while giving little regard, if any, to the interests of the stakeholders other than shareholders which includes employees, creditors, and the community at large.

The American corporate governance regime has mainly been shareholders-oriented and thus revolved around maximizing the shareholders’ value. However, in recent years, this doctrine has faced feuds as the focal point of this doctrine is the shareholders, even at the expense of each and every other stakeholder. But the broad spectrum other than that of shareholders also have an intrinsic value and their interest cannot be neglected under the guise of shareholders’ supremacy. That said, the deal may benefit the shareholders as the target board has placed its reliance on value certainty and financing but the fate of Twitter’s other stakeholders is still riddled with ambiguity.

In this post, we will examine how the stakeholders’ are not protected in the Twitter’s deal. Firstly, we will unwrap the factors that have significantly contributed to neglecting stakeholders’ interests. Secondly, we will state the possible recourse which could have been adopted along with a few recommendations.

A Premier on Shortcomings of the Musk-Twitter Deal

Elon Musk’s takeover of Twitter is all the rage. However, whether Musk’s takeover is, in reality, as tempting as he claims it is, is yet to be analyzed. While the board of Twitter assures the protection and promotion of the existing shareholders, the interests of the other stakeholders in the company remain neglected.


The takeover of Twitter has fiercely impacted the employees. While Twitter’s current CEO, Parag Aggarwal, insists that there would be no layoffs, Musk is rumored to be cutting positions to increase Twitter’s profitability. During negotiations with banks, the Tesla CEO reportedly stated that after he takes over, he intends to slash employment at Twitter to boost the company’s bottom line. According to sources close to the company, Musk might not make any decisions on employee cutbacks until he takes control of Twitter.

The Community at large:

There was no mention of Twitter’s other stakeholders- users and employees, or its critical role in public discourse. Acquiring a media house is rarely about the well-being of the community but a marketing tool for the company. Twitter is no different and often used as a publicity branch. Additionally, musk’s tweets are known for disrupting the normal functioning of the market. The fluctuations observed in the case of Bitcoins, Dogecoin, etc. are evident of how markets can be move. Hence, if the Tech mogul acquires Twitter, then it will surely have a devastating effect on the community at large. The interests of the community will stand neglected due to the compromised position of the global platform in the buy-out of Twitter.

Elon Musk, in a press release, supported free speech. While Musk’s actions have not always aligned with his thoughts, it is evident that Americans are willing to trust him. Musk’s detractors, on the other hand, are concerned that the billionaire’s control of the platform will silence their voices, given that he has frequently blocked opponents from his account. Although propagation of free speech is quite appealing, boundless freedom at the stake of hate speech, violent threats, or misinformation seems insignificant.


The Tesla shareholders are an overlooked group in the enthusiasm around Musk’s Twitter takeover. Tesla shareholders seem to be stuck in a war zone devoid of any ammunition. They have no say in the Twitter deal, and it’s safe to assume that the Musk fan club, which includes the company’s non-executive directors, will remain silent. Tesla’s shares dropped 12% when Musk purchased Twitter, wiping out $126 billion in market capitalization. Meanwhile, according to Fortune, Musk issued a blanket personal guarantee on the entire $12.5 billion loans secured by his Tesla shares. This demarcates that the interests of the shareholders of Tesla have been compromised at the price of Musk’s ambition. While Musk refuses to back down from taking over Twitter, Tesla’s shareholders’ lack of trust in its executive poses a great concern for the company’s future.

Easiest Expedient that could have been adopted

Having stated all the above, the deal is dampening the interests of all the stakeholders. In that regard, the best possible recourse which could have been adopted is as follows:

First, it is a well-established fact that when employees are doing good, then the corporation as a whole is rewarded. Employees have a fiduciary duty towards their employer, but employers are not bound by any such duty towards their employees. Similarly, corporations have an obligation towards shareholders, but such an obligation is not extended to employees. This contrasting relationship is often disputed before the Delaware Court of Chancery. In the case of Unocal vs Mesa Petroleumthe interest of the stakeholders (employees) has been placed in pari passu with that of the shareholders. However, the recent Twitter debacle justifies the contention that corporations have not exercised fiduciary duties toward their employees. Therefore, in this regard, a few recommendations are, firstly, productivity gains should be shared amongst employees and shareholders equally and, secondly, a mechanism for wealth maximization of employees as well as shareholders should be in place.

Second, studies have shown that there is a need for a significant change in a corporation’s approach. A paradigm shift from short-term vision goals to long-term business and societal goals which takes into account the community as well is the need of the hour. A survey indicated that more than 80% of citizens want that their CEOs to focus on social issues rather than the short – term vision goals. Lately, the corporations have also felt the pressure to account for stakeholders’ interests. This can be further substantiated with the help of increased filing of sustainability reports. Hence, there presumably exists a direct correlation between the growth of corporations and the fiduciary role of corporations towards the community.  A nascent concept that has gained traction, known as corporate governance ratings, can be adopted. This should be adhered to by each and every corporation for an optimal level of governance within the corporations. The Corporations should disclose all the information related to audit structure, accounting, publicly disclosed information, court cases if any filed, ownership and control, shareholder rights etc. Basis this information, the Credit Rating Agencies (CRAs) shall rate the corporations. The objective will be two-fold; firstly, such compliance will ensure that the interest of the community at large is protected, and secondly, the practices conducted against the community at large are also thwarted. Hence, the ratings will ensure the credibility and accountability of the Board and their capacity to generate wealth for the stakeholders.

Third, in the case of Credit Lyonnais vs Pathe Communications, it was stated that when Corporations owe fiduciary duties to the creditors, then financial reporting disputes are minimized between the equity holders as well as the creditors. It also reduces the chances of manipulation, which favors equity holders’ interest over the creditors’ interest. Hence, creditors should be empowered to bring action whenever there exists a breach of fiduciary duty on the part of Corporations.

Last, Twitter’s disregard towards non-shareholders stakeholders reflect the requirement for a transformation. There is a need for a shift in prioritization within a business, from shareholders’ supremacy to stakeholder capitalism. Stakeholder capitalism illustrates a growing understanding of how all stakeholders can benefit from shared value. Stakeholder capitalism isn’t about subjugating company demands to do the right thing. It is more of a model to determine the best way to generate long-term, sustainable returns for investors by addressing the requirements of all stakeholders.

Hence, the Twitter deal has showcased the requirement for a change in the model structure. It is high time that the board of the company relentlessly focus on the pluralist model structure, protecting and propagating the interests of all the stakeholders in every situation.


The approach of Twitter’s board towards shareholders’ interest primacy forsaking the interests of other stakeholders reflects the myopic outlook of the executives. The present instance of Twitter is alarming concerning its sustainability. A company’s sustainability is reliant upon the board, the shareholders, and also the stakeholders of the company. The collapse of Capital Markets can be traced back to the Reflexive Shareholder Primacy. To have an honest relationship with profit, a company must produce money while also creating value for all stakeholders.


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