Corporate Governance and the Twitter Board decision on Musk´s offer

Columbia University Law Professor Jeffrey N. Gordon recently starts a brief entry in the Oxford Law blog showing his surprise that the only reason the Twitter board apparently considered to accept Mr Musk´s offer was the interest of shareholders; moreover, he seems bewildered that public welfare, the forecast of Mr Musk´s management, the effect of the change in control on Twitter´s infrastructure had been ignored. Difficult to understand his surprise from a Shareholder primacy perspective, but mainly if fiduciary duties are considered, …, how should directors have acted? Let´s see how Prof. Gordon sees this.

According to his interpretation of Delaware corporate law, directors could have dismissed the offer on grounds of other stakeholders´interests, eventual externalities to be imposed by Mr Musk on society, or even on grounds of an eventual long-term valuation of the company which might have been considered higher than the offer price, (the last one seems to be reasonable, but board may well have analized and rejected this).

The Dodge vs Ford case: should academics keep teaching it or not?

One of the first voices that emerged against keeping the doctrine emanating from this resolution by the Michigan Supreme Court was Ms Lynn Stout, in her article “Why we should stop teaching Dodge vs Ford”, (1). Prof Bainbridge opposses to this view, (2). We will review both in what follows.

The case can be briefly described as follows: a founder and majority shareholder, (Mr Henry Ford) was sued by the Dodge brothers on the accusation that he was restricting paying dividends to shareholders even if profitability was very high; the court did not buy Mr Ford´s reasoning on preferring investing to build better and cheaper cars and pay better wages, (for their employees to be able to buy a car, for instance). And the judge stated that the purpose of a business corporation was the pursuit of profit, so that directors did not have discretion to work for alternative goals but only to select the means to pursue this one.

She asserts that this statement was not necessary and a mistake also, being strange to Corporate law.