Conflicts of interest if Square chief heads Twitter

Mr Jack Dorsey has publicly said that he recuses himself from decisions involving both Twitter and Square.
Mr Jack Dorsey has publicly said that he recuses himself from decisions involving both Twitter and Square.PHOTO: BLOOMBERG

SAN FRANCISCO • If Mr Jack Dorsey becomes permanent chief executive officer of both Twitter and mobile payments company Square, he could struggle with conflicts of interest in the business that is key to both companies' futures: e-commerce.

Corporate governance experts and some investors have already expressed concern that he faced tough choices in his role as interim Twitter chief and head of Square. That intensified on Wednesday after a report by tech news website Re/code that he was expected to be named permanent CEO at Twitter soon, while keeping his job at Square.

"The biggest conflict would simply be the allocation of his time," Ms Esther Dyson, an early Square investor who holds several board and advisory positions at tech companies, told Reuters in an e-mail on Tuesday. "CEO is a full-time job."

Neither company commented on the Re/code report.

Mr Dorsey has acknowledged the risk of a conflict of interest, publicly saying he recuses himself from decisions involving both companies. Still, that leaves him out of discussions in a key area of growth.

Twitter has increased its payments and e-commerce options since Mr Dorsey took the helm as acting Twitter chief on July 1.

Last month, Twitter announced a partnership with Square that would enable users to make political donations directly through the site. On Wednesday, Twitter said it was partnering with US retailers to help them sell products through a "buy now" button in tweets, a feature that does not involve Square and relies on potential rivals to Square's service.

The clearest conflict would be if Twitter continues to roll out payments and e-commerce features in partnership with Square.

Mr Dorsey would have a fiduciary duty to pursue both parties' best interests, lawyers said, which could pose problems. "The list of conflicts is as long as the imagination will permit," said Dr Lawrence Hamermesh, professor of corporate and business law at Widener University School of Law. "Every waking moment, (he) is going to have to decide: 'Am I going to work on Twitter or Square?'"

Slow user growth and muted response to a new advertising feature led Twitter to lower its revenue forecast for the year in April. Its shares went public in 2013 and gained as much as 60 per cent that year but have since fallen to near the initial public offering price.

Both companies declined to comment on the conflict-of-interest issue.

REUTERS

A version of this article appeared in the print edition of The Straits Times on October 02, 2015, with the headline 'Conflicts of interest if Square chief heads Twitter'. Print Edition | Subscribe