In the past few months, the hashtag #WeAreTwitter gained traction as Twitter users began voicing their thoughts about the company’s corporate structure. More than 3,300 people signed a petition supporting the notion of “freeing” Twitter from Wall Street. The idea is that Twitter should not be run as a solely for-profit corporation, focused on maximizing short-term shareholder value and potentially making unwanted changes to the beloved platform. Users were concerned about a possible acquisition of the company after potential buyers Google and Salesforce briefly expressed interest. Instead of outside bidders, the users hope to buy the platform and run it as a cooperative, which would be better able to manage the company for the benefit of its users.
A cooperative is a business owned and operated for the benefit of the “user-owners”, i.e., those who use its services. Members buy shares in the cooperative and gain voting power to control the direction of the cooperative, but the number of shares they buy is irrelevant in terms of voting power; each vote weighs the same.
The most recent financial statements published by the company were not encouraging. Twitter reported a loss of $167 million, alongside slowing revenue and user growth. These results caused a sharp share price drop of 12% on the day the news broke. Despite these results, at a market value of over $11 billion, is it unlikely that the users supporting this proposal could buy the company and turn it into a cooperative. Accordingly, Twitter users should consider advocating for a different corporate structure, one where the company can still make profits, but its social goal is legally protected. Becoming a benefit corporation achieves just that.
Benefit Corporation – A Better Solution?
Benefit corporations are becoming increasingly popular. Over 30 states have passed legislation allowing companies to become benefit corporation, and more states are in the legislative process of doing so.
Benefit corporations have three basic characteristics:
They “have an expanded purpose beyond maximizing share value to explicitly include general and specific public benefit”;
They “are required to consider/balance the impact of their decisions not only on shareholders but also on their stakeholders”; and
“They are required to make available to the public, except in Delaware, an annual benefit report that assesses their overall social and environmental performance against a third party standard (…)”.
The first state to adopt benefit corporations as a legal form was Maryland in 2010. Naturally, since it is a rather new corporate structure, the concept presents many uncertainties. It is unclear how courts will interpret the duties of care and loyalty in this new structure, and how it will impact raising capital.
Nonetheless, by becoming a benefit corporation, Twitter could address the users’ concerns without completely neglecting its profit goals. It could be a win-win situation; the users get reassurance that their voice will be heard, which can in turn increase user interest in the platform and raise profits. If Twitter users are serious about wanting to make the platform more innovative, with a “better, more user-friendly business model” as their petition says, they should consider asking for a less aggressive change; electing to become a benefit corporation.
Mica Ruppin is an Israeli lawyer currently pursuing an LLM in Corporation Law at NYU. Prior to attending NYU, Mica worked in the commercial litigation department of one of Israel’s top law firms, before joining the Israeli Embassy in Washington, D.C. as an International Finance Institutions Consultant. She graduated magna cum laude from the Interdisciplinary Center (IDC) in Israel, with a dual degree in Law and Accounting (LL.B/B.A).