Thursday5 March 2020 ★ FINANCIAL TIMES 13
COMPANIES
H A N N A H M U R P H Y— S A N F R A N C I S C O
T I M B R A D S H AW— LO N D O N
WhenJack Dorsey eturned to leadr
Twitter n 2015, it seemed to comei
straight from the Silicon Valley story-
book.Ashis idolSteve Jobs taApple adh
two decades earlier, the co-founder of
an admired brand with an unloved
stock would take back control and
restore it toglory.
But one agitator does not buythe Val-
ley’scult of the founder.Elliott Manage-
ment, thehedge fund led byPaul Singer,
is pushing for Mr Dorsey to be replaced
after taking a $1bn stake in Twitter.
Elliott objects to the fact that Mr Dor-
sey is simultaneously chief ofTwitter
andSquare, the payments group he co-
founded in 2009, yetplans to spend sev-
eral months this yearin Africa atherr
thanin San Francisco, wherethe com-
panies are based.
“It begins and ends with the leader-
ship,” saida person familiar with the
situation. “You have a company that
is entering a period of incredible impor-
tance, including the upcoming political
election, and you have a part-time
CEO that runs a larger publicly-traded
company.”
Whilearch-rivalFacebook’s valua-
tion has doubled in the last four and a
half years, despitethe turbulence that
followed the 2016 election, Twitter
stock increased less than 10 per cent
between Mr Dorsey’s appointment as
permanent chief in October 2015 and
the end of last week, before Elliott’s
intervention was revealed.
Since the first quarter of 2017, Face-
book’s advertising revenue per daily
active userrose 72 per cent, three times
as much as Twitter’s, while its net oper-
ating margin of 34 per cent for 2019
eclipsed Twitter’s 11 per cent.
Elliott’s demands, which include
nominating four board members, come
asmany former employees complain
thatwhat they call a chaoticculture
and a lack of clear decision-making
from Mr Dorseyhave stuntedrevenue
growth and the ability to clean up
app abuse.
Critics say the groupmust act
urgently iven its role in the democraticg
process during the US 2020 election, as
a platform for politicians.
“What you get with founders is
they completely understand the com-
pany,” said oneinvestor. “But often
they are not the person to take it to the
next level.”
Twitter declined to comment.
Mr Dorseyhas a reputation as a qui-
etly thoughtful, likeable ccentric, withe
many column inches dedicated to his
propensity to ellness trends such asw
meditation, ice baths and fasting. This
guru-like quality — he has been dubbed
the Valley’s answer to Gwyneth Paltrow
— has translated into a hands-offstyle
with mixed results for the company:
thoughtful, yet easily distracted.
“There was a strange balance with
Jack. When he was there, he was
remarkably accessible... and always
warm and welcoming ,” said an
ex-employee. “But there was almost a
sense that maybe Jack shouldn’t have
been so nice.”
Even critics credit Mr Dorsey with
restoring the group’s mission and sense
of purpose, which was so lacking in 2015
that itsteam could not agree on what the
service wasfor.
He has madeprogress in tackling the
abuse and bullying that was so rife on
Twitter that it discouragedBob Iger,
Disney’s chief executive, from a poten-
tial acquisition of the company in 2016.
“The nastiness is extraordinary,” Mr
Iger told the New York Times last year.
But criticsinside and outside the
group say that while Facebook has
undergone several transformations,
Twitter has failed to evolve ither as ae
product or a business.Mis-steps include
efforts to push into new video formats
with itsPeriscope nda Vine pps, whicha
faltered despite the subsequent success
ofTikTok, a platform that strongly
resembles Vine’s short, quirky clips.
Formerexecutives say that while
audience growth has regained momen-
tum, the group has failed successfully to
monetise it, with its offer to advertisers
severely lagging behindlarger rivals.
One said that Twitter needed
“stronger salesand evenue productr
leadership... The execution of the rev-
enue product teamis.. .light years
behind the Facebook and Instagram
ad product”.
Recent employees describe the com-
pany internally as often disorganised
and paralysed by indecision. Another
formerexecutive said the inertia was
caused in part by Mr Dorsey presiding
over abottom-upculture where the
staff, typically in their early twenties,
are encouraged to hold regular open dis-
cussions but are too hesitant to offend
one another. That has limited the pace
of innovation.
“It’s locked in a cycle of social
restraint and a lack of direction from the
top,” the person said. “It takes the slight-
est concern for paralysis to fall into
place, which is why they don’t put out
[new] features.”
Others say the culture is also to blame
for the company’s travails when it
comes to tackling election disinforma-
tion on the site. “The fastest way to
silence a room is to bring up that topic,”
another former employee said.
Not only is Mr Dorsey’s effectiveness
as a leader in question when he does
spend time at Twitter, but some inves-
tors and employees are concerned that
he is away from San Francisco so often.The latest worry is his apparent plan
to move to Africa for as long as six
months this year. Whilein the Ethiopian
capital Addis Ababa, Mr Dorsey tweeted
that he planned to return to Africa in
mid-2020 for three to six months, to
explorecryptocurrency opportunities.
That left some Twitter shareholders
wondering how the entrepreneur
planned to run two companies while
being on a different continent and time-
zone, despite having a strong finance
chief inNed Segal.
“You cannot turn round to investors
and say you have two jobs — that’s half
the time you’re not making Twitter bet-
ter,” said one investor.
Despite the internal gripes, news of
Elliott’s assault prompted an outpour-
ing of public support from Twitter
employees this week.
“#WeBackJack because he backs us,”
tweeted God-is Rivera, global director of
culture and community at Twitter. “Our
mission is bigger than just profit.”
Mr Dorsey’s advocates argue that
replacing him would be difficult given
Twitter’s quirky culture and the loyalty
shownhim bythe rank nda ilef. One
compromise could be the appointment
of a chief operating officer — a role that
has not been filled for two years — akin
to Facebook’sSheryl Sandberg, who has
been a vital ally to founderMark Zuck-
erberg.
“What you really need is a Sheryl,”
said Rich Greenfield, analyst at Light-
Shed. “I don’t think you can remove [Mr
Dorsey] without doing tremendous
damage.”
Mr Dorsey’s hero Steve Jobs suc-
ceeded at running Apple whileleading
Pixar, the digital animation studio, for
several years. But while Jobs turned out
hits such as the iMac and the iPod, Mr
Dorseyhas yet to produce the innova-
tion that can silence the doubters.
“The only way to keep the wolves at
bay is if you’re doing so well that you are
outperforming everyone else,” the
shareholder said. “But Twitter hasn’t
done that.”
Additional reporting by Ortenca AliajElliott aims to defenestrate Twitter chief
Activist hedge fund has little time for the Valley founder cult and wants Dorsey out amid talk of a chaotic culture
Facebook leaves Twitter behind
Ad revenues per daily active user ( ) Q
FacebookTwitterSource: BloombergShare prices rebased FacebookTwitterSource: Refinitiv Source: BloombergOperating profits ()- Twitter
FacebookD O N W E I N L A N D— B E I J I N G
Elliott Management andBank of East
Asia re hitting pause in their six-yeara
battle for control of the lender,to allow
for areview that could result in the sale
of large parts of Hong Kong’s last large
family-owned bank.
Thepair saidyesterday that Bank of
East Asia had hiredGoldman Sachs ot
conduct areview of the bank’s portfolio
of businesses and assets, without giving
any further detail.
It was their first joint statement since
the fight began in 2014, when Elliott
bought astake in the bank.
The activist hedge fund, run byPaul
Singer, has long pushed for the Li family
tosell the bank. The Lis, who founded
Bank of East Asia in 1918, have sought to
maintain control.
Yesterday’s statement comes two
months before a trial scheduled to start
in May that was expected to rule on
whether Bank of East Asia had taken on
strategic investments from Japan’s
SMBC nd Spain’sa Caixa n order to pro-i
tect against a hostile takeover.
Elliott argued that Bank of East Asia
raised that capital to fortify the found-
ing family rather than serve its other
investors.
Thefund has applied to put thelegal
proceedings n hold while the review iso
carried out. The approaching trial date
wasa factor hatt led to the compromise,
a person close to the matter said.
Shares in Bank of East Asiarose
5.5 per cent yesterday in Hong Kong.
The Li family controls the bank
despite holding only 7 per cent of
its shares. Elliott holds about 8 percent, while SMBC and Caixa have
stakes of 17.5 per cent and 16 per cent
respectively.
Thebattle for control of Bank of East
Asia has been one of the fiercest activist
investor situations in Hong Kong, where
hostile takeovers andactivist invest-
ments are rare.
The conflict has pitted thefund
against a complex family holding struc-
ture common to many Asian conglom-
erates ut not often challenged in court.b
Theparties would not comment
further on what would be targeted
in the strategic review of Bank of East
Asia’s assets.
A person close to the matter said
that one of Elliott’s objectives was to
introduce investors to the bank’s
large China business, or for that unit to
be sold off.Financials
Ceasefire in Bank of East Asia battle
Guru at bay:
Jack Dorsey,
who plans to
spend several
months in Africa
this year, is
given to wellness
trends such as
fasting, ice baths
and meditation
Canadian Press/Shutterstock‘You have
a companythat is
entering aperiod of
incredibleimportance
and youhave a
part-timeCEO’
MARCH 5 2020 Section:Companies Time: 4/3/2020- 17:48 User:alistair.fraser Page Name:CONEWS2, Part,Page,Edition:EUR, 13, 1