Jack Dorsey's decision to step down as chief executive officer of Twitter caught investors and employees by surprise but the framework for his departure had been in place for more than a year.
When Elliott Management Corp started pushing for changes at Twitter Inc in February 2020, one of its stipulations was that the company update its CEO succession plan-the activist investor didn't like that Jack Dorsey had two full-time jobs, and wanted a strategy in place for when he eventually stepped down from the social network.
On the night before the US presidential election that November, more than a year ago, Twitter's board issued a statement saying that the plan for a potential leadership shift had been approved. What the board didn't say was that at the top of the list of internal candidates to succeed Dorsey, according to two people familiar with the matter, was Chief Technology Officer Parag Agrawal.
While Dorsey's decision to step down as chief executive officer last week caught investors and employees by surprise, the framework for his departure-including identifying his designated replacement-had been in place for more than a year. The plan's early iterations didn't guarantee Agrawal the top job, and Twitter's board briefly considered a handful of external candidates for the role, said the people, who asked not to be named because the discussions were private. But Agrawal was Dorsey's top choice for the job, and he was the only candidate-internal or external-seriously considered when the time came to fill Dorsey's role, people familiar said.
"He's been my choice for some time given how deeply he understands the company and its needs," Dorsey wrote in an email to employees.
Agrawal's official promotion to CEO elevated a previously little-known technologist, whose mandate included overseeing Twitter's infrastructure, blockchain and crypto initiatives, to one of the highest-profile gigs in the industry. The move, which has already led to a restructuring among Twitter's senior leadership, followed Elliott's late 2019 acquisition of a stake in the company and a subsequent public campaign to pressure Dorsey to improve his company's business by stepping up growth and building products faster.
In March 2020, Elliott and Twitter came to an agreement that left Dorsey in his job, but required a number of changes to the board, lofty new business goals, and the succession plan that eventually identified Dorsey's successor. Eight months later, in November 2020, the board approved of Twitter's management structure following a review, keeping Dorsey in control.
Yet less than a year later, in October 2021, Dorsey alerted the company's directors and some of its top staff of his plans to resign, according to a person familiar with the move. Though Elliott's agitation for change led to speculation that it may have pushed Dorsey out after all, the firm didn't give Dorsey a new ultimatum or demand that he resign, two people familiar said.
Twitter director Martha Lane Fox, who chairs the board's nominating and governance committee, oversaw the CEO search process, which moved much quicker than the last time Twitter looked for a new CEO in 2015. That time, Twitter's board eventually brought back co-founder Dorsey after a months-long public search. The board didn't hire an executive search firm this time, according to a person with knowledge of the process, and the board quickly settled on a known quantity: Agrawal, a deeply technical, long-tenured Twitter executive with little external prominence.
Even though Dorsey may have left on his own timeline, it's possible that Elliott's pressure on Twitter still played a part in the CEO's decision to step away and focus on his other company, digital-payments giant Block Inc, formerly known as Square. A spokesperson for Twitter declined to comment. A spokesman for Elliott pointed Bloomberg to the firm's statement last week, in which it said its "collaboration" with Dorsey over the past two years was "productive and effective."
Insider and the New York Times previously reported that Agrawal had long been a top candidate.
By the time Elliott first approached Twitter's board in February 2020, the social network had been a potentially attractive target for activist investors for years.
The company's cultural influence greatly outpaced its business performance, leading some investors to see the company as undervalued, and its leader was holding two CEO jobs, meaning his attention was divided. Twitter's stock structure was also appetizing to activists. Unlike Facebook
parent Meta Platforms Inc. or Snapchat owner Snap Inc., which have preferred stock classes that give early investors and executives outsized control, Twitter has just one class of stock. That means anyone with enough money to do so can buy up shares to create pressure on the company.
In November 2019, Dorsey gave Elliott even more fodder for action when he tweeted that he planned to spend as long as six months in 2020 working from Africa. It was a questionable approach for a CEO running two major technology companies based in San Francisco. (While the tweet was controversial at the time, and Dorsey walked back that plan later, he was still able to pursue his wanderlust: He spent much of the past 18 months working remotely from Hawaii, Costa Rica
and French Polynesia because of the pandemic.)
Elliott's approach started with a letter to Twitter's board, which led to a first meeting between representatives from both sides in late February 2020 at a lounge at San Francisco International Airport. The letter was never made public, but Elliott had issues with Twitter's corporate governance, its pace of execution and-most importantly-its CEO's decision to hold two jobs at once. Dorsey was also against hiring a chief operating officer to help run Twitter's daily operations, people with knowledge of the situation said, a move that might have appeased some critics who worried he wasn't giving Twitter enough attention.
When Elliott moved in, Twitter executives knew they were at risk. Elliott and its founder, Paul Singer, have a reputation for getting their way when they invest in public companies. The year prior, the firm had invested in EBay Inc. and demanded changes that led to CEO Devin Wenig resigning nine months later. In 2017, Bloomberg News called Singer "the world's most feared investor."
Twitter executives started looking for friendly faces. The company hired Goldman Sachs Group Inc. as an advisor, and the board discussed trying to bring on Laurene Powell Jobs as a director, two people said. The philanthropist and Silicon Valley businesswoman, who was married to the late Apple Inc. co-founder Steve Jobs, is a friend of Dorsey's.
Executives also connected with the investment firm Silver Lake Partners and its co-CEO, Egon Durban. The thinking was that Durban and Silver Lake would be friendly to Twitter and help offset some of the intense pressure coming from Elliott. A spokesman for Silver Lake declined to comment.
In a twist that surprised many observers, Twitter and Elliott quickly came to a public settlement just weeks after first contact. Twitter would add Elliott's Jesse Cohn to its board; the board would review its corporate governance and succession plan for CEO; and Twitter would agree to new user growth and revenue goals. Silver Lake invested $1 billion in Twitter and Durban was added to the board as well. Dorsey would keep his job-for the time being. Some wondered whether the truce would be short-lived, given Elliott's track record of CEO ousters.
For most of the next eight months, though, things went relatively smoothly. Twitter's user base surged thanks to the global pandemic, which created an intense consumer thirst for real-time news. Revenue growth was inconsistent for a while as advertising dollars dried up, but the user growth meant the promise of more people to reach via Twitter once those marketers started spending again. Twitter said that building better targeted ads was its "number one priority" on an earnings call in April 2020-a stark change after previously focusing on goals like "healthy conversations"-and by the middle of that summer, Twitter had announced plans for a subscription product that had been discussed internally for years.
On Nov. 2, 2020, Twitter's board, which now included members from both Elliott and Silver Lake, issued a filing that it had reviewed the company's corporate structure. It also "expressed its confidence in management and recommended that the current structure remain in place." Again, Dorsey got the activists' support to keep his job.
Still, Elliott never fully disappeared. Twitter announced a handful of ambitious revenue goals during an analyst day event in February 2021-its first Analyst Day since 2014-including a goal to double annual revenue by 2023. Cohn announced in April that he would step off the company's board, but just a month later, Elliott bought more than $200 million in additional Twitter stock after shares slumped following a poor earnings report.
The deeper investment was a not-so-subtle reminder that while Cohn was leaving the board, Elliott was still nearby and waiting to pounce if things didn't improve. As of August, it still owned a large Twitter stake worth well over $1 billion, according to a person familiar with the companies.
It's possible that those lofty goals and the looming prospect of further activist investor pressure helped inspire Dorsey's departure. It's also possible that the Square, now Block, simply aligns more closely with Dorsey's passions. He's an outspoken Bitcoin proponent, tweeting about the digital currency constantly. While Twitter is dabbling in crypto and blockchain technologies, Block is more focused on financial technology and has an entire division building Bitcoin-related financial services.
No matter why Dorsey left, Elliott is still playing close attention to Twitter. Even though the firm no longer has a board seat, its statement the day Dorsey resigned gave Agrawal a full-throated endorsement.
"Having gotten to know both incoming Chairman Bret Taylor and incoming CEO Parag Agrawal," the statement reads, "we are confident that they are the right leaders for Twitter at this pivotal moment for the company."