In recent days, billionaire entrepreneur Elon Musk has made headlines with his bold attempt to acquire Twitter. If successful, Musk has said that he plans to take the social media company in a new direction, and one of his first proposed changes is to do away with board member compensation entirely.
There are several reasons why an incoming CEO might choose to eliminate or forego board compensation. For one thing, it sends a strong message that the interests of shareholders come first.
For another, it can be a way of signaling confidence in the company’s prospects; after all, if the CEO believes that the company is doing well and will continue to do well, then there shouldn’t be any need for additional compensation beyond what they’re already receiving.
Finally, it can simply be seen as a way of saving money; if a company is already stretched thin financially, eliminating board compensation can free up some much-needed cash flow.
Of course, there are also potential downsides to such a move.
For instance, it could make it harder to attract top talent to serve on the board; after all, why would someone give up their time and energy if they’re not going to be compensated for it?
Additionally, eliminating or reducing board compensation could create tensions between the CEO and directors who feel like they’re being asked to work for free; such tension could potentially lead to conflict and infighting down the road.
So far Musk has only floated the idea of doing away with board compensation; whether or not he actually follows through remains to be seen. But given his track record of shaking things up and pushing boundaries, it wouldn’t be surprising if he ultimately decides.
What does a board at a company do?
A board of directors is a group of people who are elected by the shareholders of a company to oversee the management of the company and make major decisions on its behalf. The board typically meets several times a year to discuss strategic issues and make decisions on important matters such as hiring or firing the CEO, approving major expenditures, and increasing or decreasing the dividend.
The size of a company’s board of directors can vary but is typically made up of between five and 15 members.
And by the way, it is generally unusual for board members to own shares of the company they supervise (Take that Musk!). This is because board members are typically expected to act in the best interests of the company as a whole, rather than their own personal financial interests. Therefore, if a board member owned shares of the company, they could be perceived as having a conflict of interest.
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Twitter’s board of directors is paid to represent the interests of shareholders, not to be a personal piggy bank for Elon Musk. If he acquires the company, it’s likely that he will fire the current board and replace them with his own cronies who will do his bidding.
This would be a huge mistake – Twitter is a publicly-traded company with tens of millions of users, and it needs experienced and independent directors to protect its long-term interests. Musk has shown time and time again that he doesn’t care about anyone but himself.
He regularly ignores advice from experts, takes reckless risks, and makes careless statements on social media. If he were in charge of Twitter, there’s no telling what damage he could do. He might alienate users by censoring certain types of speech or making irresponsible decisions that jeopardize the company’s financial health.
Twitter is too important to be left in the hands of someone like Musk. He may claim that he’ll run the company better than its current leadership, but there’s no reason to believe him.