The Reasons Elon Musk Turned Down a Twitter Board Seat

The problem with becoming a board member of a public company is that it subjects the board member to a considerable number of rules and regulations. And even someone as contemptuous of rules, laws and governments as Musk is, understands the legal hassles and threats that might ensue if he broke any of them, or rather continued to do so. 

Acquiring a 9% stake without taking the seat gives him the power to criticize and threaten without having to worry about annoying investigations, challenges and penalties. And he can always sell - or attempt a hostile takeover as his temperament dictates. JL

Jamie Condliffe and colleagues report in Protocol Source Code:

Elon’s ascension had proven controversial. The appointment of a director who’d broken securities laws, allowed racism to run rampant at his manufacturing plants, and proposed changes to Twitter that would undermine its moderating hate speech had generated considerable concern. But why did he turn down the seat? As a condition of joining the board, Musk agreed to limit his stake to 14.9%; as a board member, he would have been bound by Twitter's code of conduct; he broke SEC rules in the purchasing his Twitter stake, failing to file paperwork when his holding exceeded the 5% threshold requiring disclosure.

In a turn of events that is both surprising and also not at all surprising, Elon Musk won’t be joining Twitter's board of directors after all.

Twitter CEO Parag Agrawal announced the news in a tweet late Sunday. He wrote that the Tesla CEO's appointment was subject to a "background check and formal acceptance" that ultimately didn’t come through.

• Musk's appointment was set to become effective Saturday, but he told the company he would not be joining the board that morning, Agrawal wrote.
• Agrawal added that Twitter’s leadership had been “excited to collaborate” with Musk and “clear about the risks,” but noted that he believed that Musk’s decision “is for the best.”
• He didn’t provide any details on Musk’s reasoning for skipping the board seat.

Elon’s ascension had proven controversial to say the least. The appointment of a director who’d broken securities laws, allowed racism to run rampant at his manufacturing plants, and proposed changes to Twitter that would undermine its progress on moderating hate speech had generated considerable concern among Twitter employees.

• Management planned to hold a town hall with him to address those concerns. It's not clear if that meeting will still happen.

But why did he turn down the seat? After all, he’s not exactly one to shy away from controversy. So far, we don’t really know, but there are a few factors that could have played into it.

• As a condition of joining the board, Musk agreed to limit his stake to 14.9%. That could have irked him. (In an apparently unrelated development, Musk may no longer be Twitter's largest shareholder: Vanguard reported a 10.3% stake Friday.)
• As a board member, he also would have been bound by Twitter's code of conduct. Musk, whose past behavior suggests a studied lack of respect for rules, will no longer have to abide by those rules.
• He also broke SEC rules in the purchasing of his Twitter stake, failing to file the correct paperwork when his holding exceeded the 5% threshold that requires disclosure. That means investors could have missed out on an estimated $165 million. It’s currently unclear what the fallout of that oversight will be, and how it might affect his purchase of more Twitter shares. (As an aside, so far this morning, Twitter’s share price has been falling in premarket trading on the news.)
• And it’s also currently very much unclear how any of these factors played into his decision to turn down the board seat. If any of them did! This is Elon Musk after all.

Still, Musk spent all weekend on a Twitter criticism spree. Even if none of it seemed to address his decision to skip the board seat.

• He suggested that Twitter's San Francisco headquarters should be converted into a homeless shelter and polled users on whether the company should delete the “w” in its name.
• Musk also found time to violate a nondisparagement agreement he made in the settlement of a lawsuit with Tesla co-founder Martin Eberhard, whom he called "pure poison." (It's not the first time he breached that agreement.)
• Some of those tweets have since been deleted.

What happens next? At this point it’s probably not worth making predictions. But it’s probably safe to say the story is far from over.