Of the two sides, Twitter has so far been more aggressive in the discovery process for the case. The company has issued more than 84 subpoenas to uncover discussions that might prove that Mr. Musk soured on the acquisition because the economic downturn decreased his personal wealth. (Mr. Musk’s net worth still stands at $259 billion, according to Bloomberg.)

Twitter has sent subpoenas to Mr. Musk’s friends and associates, such as the former SpaceX board member Antonio Gracias and the entertainment executive Kristina Salen, to get insight into their group chats. The company has also summoned investors like Mr. Andreessen and Mr. Ellison, who agreed to pony up money so Mr. Musk could do the deal.

Mr. Musk himself has agreed to sift through every text he sent or received between Jan. 1 and July 8 for messages relevant to Twitter. His side’s subpoena total stands at more than 36 — including one to Mr. Dorsey — as Mr. Musk tries to show that Twitter lied about the number of inauthentic accounts on its platform, which he has cited as a reason to pull out of the deal.

Mr. Musk has demanded voluminous data from Twitter, including correspondence among its board members and years of account information. Last Thursday, the court granted Mr. Musk a limited set of 9,000 accounts that Twitter audited to determine how many bots were on the platform during a particular quarter. He has also subpoenaed the company’s bankers, Goldman Sachs and J.P. Morgan.

But Mr. Musk has also shown his unhappiness over Twitter’s attempts to obtain his group chats. This month, his lawyers tried limiting the company’s inquiries, saying they did not plan to turn over messages from “friends and acquaintances with whom Mr. Musk may have had passing exchanges regarding Twitter.”

tweeted.

Mr. Sacks, another friend of Mr. Musk’s who worked with him at PayPal, responded to a subpoena from Twitter with a tweet that included an image of a Mad magazine cover featuring a giant middle finger.

In a court filing on Friday, Mr. Sacks’s lawyers, who filed a motion to quash the subpoenas, said he had produced 90 documents for Twitter so far. They accused the company of “harassing” Mr. Sacks and creating “significant” legal bills for him by subpoenaing him in California and Delaware.

A lawyer for Mr. Sacks did not respond to a request for comment.

Kathaleen McCormick, the judge overseeing the case, has largely waved off Mr. Musk’s objections about the subpoenas to his friends. Mr. Musk’s conduct in discovery “has been suboptimal,” and his requests for years of data were “absurdly broad” she wrote in rulings last week.

“Defendants cannot refuse to respond to a discovery request because they have unilaterally deemed the request irrelevant,” Ms. McCormick wrote. “Even assuming that Musk has many friends and family members, Defendants’ breadth, burden, and proportionality arguments ring hollow.”

Ed Zimmerman, a lawyer who represents start-ups and venture capitalists, said it wasn’t surprising that Silicon Valley techies appeared unwilling to be drawn into the case. The venture industry has long operated with little regulatory oversight. Investors have only begrudgingly become more accustomed to legal processes as their industry has fallen under more scrutiny, he said.

“Venture for so long has been very accustomed to being an outsider thing,” he said. “We didn’t have to focus on following all the rules, and there wasn’t that much litigation.”

For law firms, Mr. Musk’s battle with Twitter has become a bonanza — especially financially.

“I’m sure they’re all hiring fancy high-end law firms,” Mr. Melkonian said. “Those guys are going to charge thousands of dollars per hour for preparation.”

That’s if you can find a lawyer at all. Between Mr. Musk and Twitter, they have sewn up a passel of top law firms.

Twitter has hired five law firms with expertise in corporate disputes and Delaware law: Wachtell, Lipton, Rosen & Katz; Potter Anderson & Corroon; Ballard Spahr; Kobre & Kim; and Wilson Sonsini Goodrich & Rosati. Mr. Musk has retained a team of four firms: Skadden, Arps, Slate, Meagher & Flom; Quinn Emanuel Urquhart & Sullivan; Chipman Brown Cicero & Cole; and Sheppard Mullin.

Other leading tech law firms — including Freshfields Bruckhaus Deringer, Perkins Coie, Baker McKenzie, and Fenwick & West — declined to comment, citing conflicts in the case.

Lawyers sitting on the sidelines probably feel left out, Mr. Zimmerman said. “If I were a trial lawyer in San Francisco, with a specialty of dealing with venture funds and the growth companies they invest in, there ought to be that FOMO,” he said, referring to the shorthand for the “fear of missing out.”

For those who have been tapped, the next several months are likely to be chaotic.

“For people who do this work, this is what we live for,” said Karen Dunn, a litigator for tech companies who has represented Apple and Uber, and who is not involved in the Twitter case. “It moves incredibly fast, it is all consuming.”

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How Elon Musk and Tesla Helped Make C.E.O Pay Even Richer

While those compensation totals are taken from the company’s financial filings, they are often estimates driven by the companies’ attempts to value the stock their chief executives might receive. As a result, the executives may earn less than those totals, especially if the bear market persists and their companies’ stock prices remain depressed, but they could also take home far higher amounts should the stocks recover.

Many of the highest-ranking executives in the survey received pay packages that were far larger than those of the heads of far bigger companies with much larger profits. For example, Tim Cook, chief executive of Apple, received his first equity award since 2011 last year and had total compensation of $99 million, putting him just 13th in the survey.

Despite the growth in pay, shareholders, apparently believing that it is being tied to performance, have voted in favor of most packages. Only 3 percent of “say on pay” votes got less than 50 percent support from shareholders in the year through June 3, according to an analysis of 1,444 public companies by Willis Towers Watson, a consulting firm that advises companies on executive pay programs and corporate governance matters.

For several years, public companies have had to compare their chief executive’s compensation with that of a typical employee, the result of a regulation passed by Congress that aimed to help investors assess the level of executive pay. Last year, chief executives earned 339 times more than the median pay of employees at their companies, up from 311 times in 2020, according to Equilar. The median employee wage rose 10 percent last year, to $92,349 from $83,808.

Last year’s executive pay jumped in part because corporate boards, which decide chief executive compensation, wanted to reward top officers for navigating their companies through the pandemic.

In addition, the stock market rallied in 2021, and the value of stock grants, which typically constitute the largest share of chief executive compensation, was also higher. When stock prices are rising, boards tend to say executives are doing a good job — and pay them more.

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Sheryl Sandberg Steps Down From Facebook’s Parent Company, Meta

Ms. Sandberg flirted with leaving Facebook. In 2016, she told colleagues that if Hillary Clinton, the Democratic presidential nominee, won the White House she would most likely assume a job in Washington, three people who spoke to her about the move at the time said. In 2018, after revelations about Cambridge Analytica and Russia’s interference in the 2016 U.S. presidential election, she again told colleagues that she was considering leaving but did not want to do so when the company was in crisis.

Last year, Mr. Zuckerberg said his company was making a new bet and was going all in on the metaverse, which he called “the successor to the mobile internet.” In his announcement, Ms. Sandberg made only a cameo, while other executives were more prominently featured.

As Mr. Zuckerberg overhauled the company to focus on the metaverse, some of Ms. Sandberg’s responsibilities were spread among other executives. Nick Clegg, the president of global affairs and a former British deputy prime minister, became the company’s chief spokesman, a role that Ms. Sandberg had once taken. In February, Mr. Clegg was promoted to president of global affairs for Meta.

Ms. Sandberg’s profile dimmed. She concentrated on building the ads business and growing the number of small businesses on Facebook.

She was also focused on personal matters. Dave Goldberg, her husband, had died unexpectedly in 2015. (Ms. Sandberg’s second book, “Option B,” was about dealing with grief.) She later met Mr. Bernthal, and he and his three children moved to her Silicon Valley home from Southern California during the pandemic. Ms. Sandberg, who had two children with Mr. Goldberg, was focused on integrating the families and planning for her summer wedding, a person close to her said.

Meta’s transition to the metaverse has not been easy. The company has spent heavily on metaverse products while its advertising business has stumbled, partly because privacy changes made by Apple have hurt targeted advertising. In February, Meta’s market value plunged more than $230 billion, its biggest one-day wipeout, after it reported financial results that showed it was struggling to make the leap to the metaverse.

In the interview, Ms. Sandberg said Meta faced near-term challenges but would weather the storm, as it had during past challenges. “When we went public, we had no mobile ads,” Ms. Sandberg said, citing the company’s rapid transition from desktop computers to smartphones last decade. “We have done this before.”

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Elon Musk Agrees to Buy Twitter

Twitter, which went public in 2013, has also had a tumultuous corporate history. It has repeatedly dealt with board dysfunction and drama with its founders, and was courted by other interested buyers in the past, including Disney and Salesforce. In 2020, the activist investment firm Elliott Management took a stake in Twitter and called for Jack Dorsey, one of its founders, to resign as chief executive. Mr. Dorsey stepped down last year.

“This company is very much undermonetized, especially compared to other platforms and competitors like Facebook,” said Pinar Yildirim, a professor of marketing at the University of Pennsylvania Wharton School of Business. “If you look at it from a point of pure business value, there’s definitely room for improvement.”

In a statement, Bret Taylor, Twitter’s chairman, said that the board had “conducted a thoughtful and comprehensive process” on Mr. Musk’s bid and that the deal would “deliver a substantial cash premium” for shareholders.

Regulators are unlikely to seriously challenge the transaction, former antitrust officials said, since the government most commonly intervenes to stop a deal when a company is buying a competitor.

The deal came together in a matter of weeks. Mr. Musk, who also leads the electric carmaker Tesla and the rocket maker SpaceX, began buying shares of Twitter in January and disclosed this month that he had amassed a stake of more than 9 percent.

That immediately set off a guessing game over what Mr. Musk planned to do with the platform. Twitter’s executives initially welcomed him to the board of directors, but he reversed course within days and instead began a bid to buy the company outright.

Any agreement initially appeared unlikely because the entrepreneur did not say how he would finance the deal. Twitter’s executives appeared skeptical, too, given that it was difficult to discern how much Mr. Musk might be jesting. In 2018, for example, he tweeted that he planned to take Tesla private and inaccurately claimed that he had “funding secured” for such a deal.

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Twitter’s Board Is Said to Seriously Consider Elon Musk’s Bid

Twitter may be moving closer to a deal with Elon Musk.

The board of the social media service met on Sunday morning to discuss Mr. Musk’s unsolicited $46.5 billion bid to buy the company, after he began lining up financing for his offer last week, two people with knowledge of the situation said. The financing was a turning point for how Twitter’s board viewed Mr. Musk’s bid of $54.20 a share, enabling the company’s 11 board members to seriously consider his offer, the people said.

Twitter’s board planned to meet with Mr. Musk’s side later on Sunday to discuss other contours around a potential deal, said the people, who spoke on the condition of anonymity because they were not authorized to discuss confidential information. Those details include a timeline to close any potential deal and any fees that would be paid if an agreement was signed and then fell apart.

Any deal remains far from certain, but the willingness of Twitter’s board to engage with Mr. Musk, the world’s richest man, represents a step forward. Mr. Musk, who has more than 83 million followers on Twitter and began amassing shares in the company earlier this year, declared his intent to buy the company on April 14 and take it private. But his proposal was quickly dismissed by Wall Street because it was unclear if he could come up with the money to do the deal. Twitter also adopted a “poison pill,” a defensive maneuver that would prevent Mr. Musk from accumulating more of the company’s stock.

Mr. Musk updated his proposal last week, putting pressure on Twitter to more seriously consider his bid. In a securities filing that was made public on Thursday, Mr. Musk detailed how he had put together financing from the investment bank Morgan Stanley and a group of other lenders, which were offering $13 billion in debt financing, plus another $12.5 billion in loans against his stock in Tesla, the electric carmaker that he runs. He was expected to add about $21 billion in equity financing.

earlier reported Twitter’s increased receptivity to Mr. Musk’s bid.

Wall Street was likely to view the openness of Twitter’s board to Mr. Musk’s bid as “the beginning of the end for Twitter as a public company with Musk likely now on a path to acquire the company unless a second bidder comes into the mix,” Dan Ives, an analyst at Wedbush Securities, wrote in a note on Sunday.

Mr. Musk’s offer for Twitter is a 54 percent premium over the share price the day before he began investing in the company in late January. But Twitter’s shares traded higher than Mr. Musk’s bid for much of last year.

when the company announced goals to double its revenue, but has since fallen to around $48 as investors have questioned its ability to meet those targets.

Mr. Musk, 50, has made clear that he sees many deficiencies in Twitter as a social media service. He has said that he wants to “transform” the company as a “platform for free speech around the globe” and that it requires vast improvements in its product and policies.

Mr. Musk has tried to negotiate with Twitter using the service itself, threatening in several tweets that he might take his bid directly to the company’s shareholders in what is called a “tender offer.” A tender offer is a hostile maneuver in which an outside party circumvents a company’s board by asking shareholders to sell their shares directly to them.

He has also acted erratically on the platform, raising concerns over how he might manage the service should he be in charge of it. On Saturday, Mr. Musk took aim at the billionaire Bill Gates, saying that Mr. Gates had taken a “short” position on the stock of Tesla, which meant that Mr. Gates was betting the carmaker’s shares would fall. On Sunday, Mr. Musk tweeted that he was “moving on” from making fun of Mr. Gates.

Even so, Mr. Musk maintains amicable ties with some high-ranking members of Twitter. Over the weekend, Mr. Musk traded friendly tweets with Jack Dorsey, the company’s co-founder and a board member. Mr. Dorsey stepped down as Twitter’s chief executive in November and soon will be leaving its board.

Both men share similar views on cryptocurrencies and on promoting more free speech online. When Mr. Musk briefly flirted with joining Twitter’s board this month, Mr. Dorsey tweeted, “I’m really happy Elon is joining the Twitter board! He cares deeply about our world and Twitter’s role in it.”

technoking.

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Twitter Grapples With an Elon Musk Problem

SAN FRANCISCO — Bright and early on Monday, Elon Musk sent the government a surprising new document.

In it, the world’s wealthiest man laid out his possible intentions toward Twitter, in which he has amassed a 9.2 percent stake, underlining how drastically his position had changed from a week ago.

Mr. Musk could, if he chose, buy more shares of Twitter and increase his ownership of the company, according to the document, which was filed with the Securities and Exchange Commission. He could freely express his views about Twitter on social media or other channels, the document noted. And he reserved the right to “change his plans at any time, as he deems appropriate.”

It was a promise — or perhaps it was a threat. Either way, the filing encapsulated the treacherous situation that Twitter now finds itself in. Mr. Musk, 50, Twitter’s largest shareholder and one of its highest-profile users, could very well use the social media platform against itself and even buy enough shares to take over the company.

“Twitter has always suffered more than its fair share of dysfunction,” said Jason Goldman, who was on Twitter’s founding team and served on its board of directors in the past. “But at least we weren’t being actively trolled by prospective board members using the product we created.”

Twitter’s 11-person board and agreed to not own more than 14.9 percent of the company or take it over. Then on Sunday, Twitter abruptly said all of those bets were off and that Mr. Musk would not become a director.

What exactly went on between Mr. Musk, who has more than 81 million followers on Twitter, and the company’s executives and board members is unclear. But it leaves Twitter — which has survived founder infighting, boardroom revolts and outside shareholder ire — with an activist investor unlike any other.

Mr. Musk, who also leads the electric carmaker Tesla and the rocket company SpaceX, is known for being unpredictable and outspoken, often using Twitter to criticize, insult and troll others. By no longer joining the board, he liberated himself from corporate governance rules that would have required him to act in the best interests of the company and its shareholders.

Mr. Musk leaned into that freedom after his decision was communicated to the company on Saturday morning. He proclaimed on Twitter that he was in “goblin mode” and suggested changes such as removing the “w” from the company’s name to make it more vulgar and opening its San Francisco headquarters to shelter the homeless. He later deleted some of the posts.

“This is not typical activism or, frankly, anything like activism that we’ve seen before,” said Ele Klein, co-chair of the global Shareholder Activism Group at the law firm Schulte Roth & Zabel. “Elon Musk doesn’t do things that people have seen before.”

a post on Sunday. Twitter, which published a biography of Mr. Musk as a member of its board that was still visible late Sunday, declined to comment on Monday.

Credit…via Twitter

Mr. Musk has long shown significant disrespect for corporate governance rules. In 2018, he faced securities fraud charges after inaccurately tweeting that he had secured funding to take Tesla private. Mr. Musk later agreed to pay a $20 million fine to the S.E.C. and step aside as Tesla chairman for three years.

He also agreed to allow Tesla to review his public statements about the company. But in 2019, the S.E.C. asked a judge to hold him in contempt for violating the settlement terms by continuing to errantly tweet about Tesla.

Inside Twitter on Monday, employees were dismayed and concerned by Mr. Musk’s antics, according to half a dozen current and former workers, who were not authorized to speak publicly. After the billionaire suggested over the weekend that Twitter convert its headquarters into a homeless shelter because “no one shows up anyway,” employees questioned how Mr. Musk would know that given that he hadn’t visited the building in some time. They also pointed out that Mr. Musk, whose net worth has been pegged at more than $270 billion, could easily afford to help San Francisco’s homeless himself.

Elliott Management accumulated a 4 percent stake and used its position to press for changes, including an ouster of Jack Dorsey as chief executive and more aggressive financial growth. Mr. Dorsey stepped down in November.

Elliott’s approach followed the typical formula for activist investors: Acquire a significant stake in a company and then press for governance and strategy changes to drive up the stock price.

“Normally an activist is very clear in their intentions,” said Rich Greenfield, an analyst at LightShed Ventures, a venture capital investment fund. But “we don’t know what Elon Musk’s true motivation is. Is this Elon having fun? Is this Elon trying to effect change? Is this Elon trying to drive the stock higher?”

Twitter is particularly susceptible to activists, analysts said, because its founders did not structure the company’s shares in a way that gave themselves more control. The founders of Google and Facebook have maintained voting power over the shares, providing them with an outsize grip over the direction of their companies.

Natasha Lamb, a managing partner at Arjuna Capital, an activist investment firm that owns some Twitter stock, said Mr. Musk was taking a more casual approach than other activist investors.

“Musk is using Twitter to have his opinions heard, but it’s not a core activity,” she said. “It appears to be what he does for fun.”

What is fun for Mr. Musk may turn out to be less so for Twitter. The relief among Twitter employees that he was no longer joining the board was short-lived, the current and former employees said, when they realized that he was no longer bound by an agreement to not buy more stock or take over the company.

Mr. Musk could continue toying with Twitter, the current and former employees said they had realized. Several added that they were afraid of what might come next.

Lauren Hirsch contributed reporting.

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Corporate Board Diversity Increased in 2021. Some Ask What Took So Long.

People pushing for greater diversity on boards say companies need to expand their searches beyond current and former senior business executives, and emphasize skills over title.

“If you look around, everyone wants a sitting or recently retired C.E.O. who’s done very similar things to what their company’s trying to do sometime in the last decade,” said Jennifer Tejada, chief executive of PagerDuty, a software company, and a member of the boards of Estée Lauder and UiPath, a software company. “That’s a very narrow lens to look through.”

Under her leadership, PagerDuty’s eight-member board has just two white directors. She emphasized that she hadn’t had to settle for lesser candidates to have a diverse board. Her directors, she noted, include the dean of engineering at the University of Michigan, Alec D. Gallimore, who is Black; Bonita Stewart, who is a board partner at Gradient Ventures, an investment arm of Google, and the first Black woman to be a vice president at Google; and Rathi Murthy, who is Indian and a top technology executive at Expedia Group.

To ensure there are enough board candidates from a variety of backgrounds, companies need to do a better job promoting more people from underrepresented groups into senior roles, some executives said. That is especially true of increasing the number of Hispanic board members, said Elena Gomez, the chief financial officer of Toast, a software company, who is on PagerDuty’s board.

“What we need to do is get more Latinx people into those management roles, and that starts deeper in how you recruit and train,” Ms. Gomez said.

But the push to make boards more diverse has led to a backlash by some conservatives and libertarians. Some are suing to overturn the California laws, arguing that the state is illegally restricting the right of shareholders to select and vote on directors based on merit and skill.

“A coercive quota is being imposed on these companies,” said Daniel Ortner, a lawyer with the Pacific Legal Foundation. The foundation is representing the National Center for Public Policy Research, a group that says it promotes free-market policies, in a lawsuit challenging the law that requires directors from underrepresented groups.

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Tesla to Move Headquarters to Texas from California

Tesla will move its headquarters from California to Austin, Texas, where it is building a new factory, its chief executive, Elon Musk, said at the company’s annual shareholder meeting on Thursday.

The move makes good on a threat that Mr. Musk issued more than a year ago when he was frustrated by local coronavirus lockdown orders that forced Tesla to pause production at its factory in Fremont, Calif. Mr. Musk on Thursday said the company would keep that factory and expand production there.

“There’s a limit to how big you can scale in the Bay Area,” he said, adding that high housing prices there translate to long commutes for some employees. The Texas factory, which is near Austin and will manufacture Tesla’s Cybertruck, is minutes from downtown and from an airport, he said.

Mr. Musk was an outspoken early critic of pandemic restrictions, calling them “fascist” and predicting in March 2020 that there would be almost no new cases of virus infections by the end of April. In December, he said he had moved himself to Texas to be near the new factory. His other company, SpaceX, launches rockets from the state.

Hewlett Packard Enterprise said in December that it was moving to the Houston area, and Charles Schwab has moved to a suburb of Dallas and Fort Worth.

Mr. Musk’s decision will surely add fuel to a ceaseless debate between officials and executives in Texas and California about which state is a better place to do business. Gov. Greg Abbott of Texas, and his predecessors, have courted California companies to move to the state, arguing that it has lower taxes and lower housing and other costs. California has long played up the technological prowess of Silicon Valley and its universities as the reason many entrepreneurs start and build their companies there, a list that includes Tesla, Facebook, Google and Apple.

Texas has become more attractive to workers in recent years, too, with a generally lower cost of living. Austin, a thriving liberal city that is home to the University of Texas, in particular has boomed. Many technology companies, some based in California, have built huge campuses there. As a result, though, housing costs and traffic have increased significantly, leaving the city with the kinds of problems local governments in California have been dealing with for years.

Mr. Musk’s announcement is likely to take on political overtones, too.

Last month, Mr. Abbott invoked Mr. Musk in explaining why a new Texas law that greatly restricts abortion would not hurt the state economically. “Elon consistently tells me that he likes the social policies in the state of Texas,” the governor told CNBC.

he said on Twitter. “That said, I would prefer to stay out of politics.”

On Thursday evening, a Twitter post by Governor Abbott welcomed the news, saying “the Lone Star State is the land of opportunity and innovation.”

A spokeswoman for Gov. Gavin Newsom of California, Erin Mellon, did not directly comment on Tesla’s move but said in a statement that the state was “home to the biggest ideas and companies on the planet” and that California would “stand up for workers, public health and a woman’s right to choose.”

Mr. Musk revealed the company’s move after shareholders voted on a series of proposals aimed at improving Tesla’s corporate governance. According to preliminary results, investors sided with Tesla on all but two measures that it opposed: one that would force its board members to run for re-election annually, down from every three years, and another that would require the company to publish more detail about efforts to diversify its work force.

In a report last year, Tesla revealed that its U.S. leadership was 59 percent white and 83 percent male. The company’s overall U.S. work force is 79 percent male and 34 percent white.

The vote comes days after a federal jury ordered Tesla to pay $137 million to Owen Diaz, a former contractor who said he faced repeated racist harassment while working at the Fremont factory, in 2015 and 2016. Tesla faces similar accusations from dozens of others in a class-action lawsuit.

The diversity report proposal, from Calvert Research and Management, a firm that focuses on responsible investment and is owned by Morgan Stanley, requires Tesla to publish annual reports about its diversity and inclusion efforts, something many other large companies already do.

Investors also re-elected to the board Kimbal Musk, Mr. Musk’s brother, and James Murdoch, the former 21st Century Fox executive, despite a recommendation to vote against them by ISS, a firm that advises investors on shareholder votes and corporate governance.

Proposals calling for additional reporting both on Tesla’s practice of using mandatory arbitration to resolve employee disputes and on the human rights impact of how it sources materials failed, according to early results. A final tally will be announced in the coming days, the company said.

Ivan Penn contributed reporting.

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Ousting Toshiba Chairman, Foreign Investors Score Breakthrough in Japan

Disagreements over the company’s management, including the handling of an accounting scandal, put Toshiba at odds with its new investors, some of whom pushed for change on its board, including the addition of more independent directors.

Tensions rose further last year when voting irregularities at the annual general meeting led to a shareholder revolt. Some investors cast blame on Mr. Nagayama, a former chief executive and director of the pharmaceutical giant Chugai who had also served as an outside director at Sony, after an internal investigation into the irregularities glossed over problems at the company.

“Nagayama tried to position himself as an agent for change, but he’s been there for a year and a lot has happened in that year, where he did not take action,” Mr. Saribas said.

In March, Toshiba shareholders, dissatisfied with the conclusions of the internal report into the problems at the general meeting, forced the company to undertake a second independent investigation.

A proposal for new directors by the Singapore-based Effissimo Capital Management had riled Toshiba’s corporate suite, according to the independent investigation. In response, executives reached out to officials at Japan’s trade ministry to coordinate tactics intended to make the firm back off.

In conversations with Effissimo, which is Toshiba’s largest shareholder, ministry officials implied that the hedge fund could be subject to investigation under a foreign investment law that had been newly revised to counter rising concerns about Chinese influence over Japanese firms.

When that effort failed, the trade ministry sent a representative to pressure Harvard’s endowment fund, another Toshiba investor, the report said. Ultimately, Toshiba got its way, and investors approved its slate of board members. The tactics had not affected the final outcome of the election, the report concluded, but were unfair nonetheless.

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A Glimpse of a Future With True Shareholder Democracy

In the near future, giant index funds, those low-cost investments that have helped millions of people to build nest eggs, will gain “practical power over the majority of U.S. public companies.”

That nightmarish vision originated in a prescient 2018 paper by John Coates.

Mr. Coates was a professor of Harvard Law School when he laid out his argument — one that I share. Now, he is a policymaker. In February, he became acting director of the Securities and Exchange Commission’s division of corporation finance. Under the new reform-minded S.E.C. chairman, Gary Gensler, Mr. Coates is in a position to address the problems he has analyzed so painstakingly.

Neither Mr. Coates nor Mr. Gensler was available for an interview, but in that paper, Mr. Coates laid out his views. Index funds, which simply track the market and make no attempt to outperform it, are so effective and cheap, he said, that they have become the investment vehicle of choice for trillions of dollars of assets. Yet under current rules, it is the index fund executives, not the millions of people who invest in them, who have the power to cast proxy votes.

Those votes are the heart of a system intended to give investors a voice on crucial matters like how much the chief executive is paid or whether a company is damaging the environment.

wrote in December 2019, that lack of proxy voting capability leaves vast numbers of investors out of the equation, and gives corporations inordinate power. Consider that roughly half of all American households, comprising tens of millions of people, have a stake in the stock market. But most own equities indirectly through funds — mainly index funds.

That leaves fund managers with the decisive power over corporate governance, and the biggest fund companies have sided with management roughly 90 percent of the time.

As Mr. Coates wrote in 2018, “Control of most public companies — that is, the wealthiest organizations in the world, with more revenue than most states — will soon be concentrated in the hands of a dozen or fewer people.” The title of his paper was “The Problem of Twelve,” referring to the unelected leaders of index fund operations.

What’s worse, mutual fund companies are frequently conflicted. Many receive revenue from public traded corporations for providing financial services connected to retirement plans, yet have the responsibility of casting critical votes on how those companies are run. Scholars like Mr. Coates have worried about these conflicts for years.

study, “Uncovering Conflict of Interests: Proxy Voting Data Reveals Bias for Asset Managers to Favor Clients,” was done by the group As You Sow, which files for shareholder proposals on issues such as the environment, gender and racial diversity, and executive pay.

The group based its finding on an analysis of 9.6 million proxy votes by fund companies, along with Labor Department records that show how much fund companies were paid for retirement plan services.

“The big fund companies have a massive aggregation of power that comes from the investments of their shareholders,” said Andrew Behar, chief executive of As You Sow. “At the very least, the fund companies shouldn’t be allowed to vote if they have conflicts of interest.”

Such apparent conflicts are permitted under current rules, as Mr. Coates noted in his 2018 paper. There are many possible regulatory solutions, but the fundamental cure would be to take proxy voting power away from the fund companies and put it in the hands of millions of fund shareholders. That change would be especially important for investors in broad-based index funds, which mirror the stock market and cannot divest shares of individual companies.

Say you don’t want to put money into Exxon Mobil because you disagree with its approach to climate change. If you own shares in an S&P 500 index fund, you will have an indirect stake in Exxon nonetheless. And if you hold the fund in a workplace retirement account, you may be stuck. Only 3 percent of 401(k) plans include investment options based on what are known in the industry as environmental, social and governance (E.S.G.) principles, according to the research firm Morningstar, a research firm that rates funds.

Reflecting widespread concern about climate change, fund companies appear to be shifting some of their proxy votes, Morningstar said. BlackRock, headed by Larry Fink, has called for a speedy transition to a “net zero economy” and Vanguard in April adopted guidelines that may lead to more “E.S.G.-friendly” votes, said Jackie Cook, director of investment stewardship research at Morningstar.

INDEX, has taken a small step that could have revolutionary implications: This year, it has begun asking shareholders how they want to vote.

Index Proxy Polling,” an easy way for shareholders to convey their preferences on proxy votes for S&P 500 companies. The aim is to demonstrate how shareholders in an index fund could express their opinions.

So far, only about 100 investors have participated, said Mike Willis, the fund manager, and current S.E.C. regulations require him to make the final voting decisions on behalf of the fund. But he said he hoped the S.E.C. would eventually allow him “to move to real shareholder democracy and go to pass-through voting, in which the shareholders say what they want and we just cast the vote for them.”

I commend Mr. Willis for his innovative approach, but note that this is not a typical index fund. It is an equal-weighted version of the S&P 500: It gives equal emphasis to big and small companies, so it may underperform the market when giants like Apple boom, and do better than the standard index when smaller companies excel. Its expense ratio of 0.25 percent is reasonable but not as low as some of the giant funds.

If experiments like this catch on, they could help to move the markets closer to something resembling shareholder democracy. But legislators and regulators — people like Mr. Coates and Mr. Gensler — will need to weigh in, too, if we are to avert a future in which the voices of investors are muffled and giant corporations are dominated by even more powerful index funds.

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