By Levi Sumagaysay
Twitter Inc. on Monday announced a proposed settlement of three shareholder lawsuits that accused executives of falsely reporting user growth and engagement metrics, in some cases projecting growth that failed to materialize.
Under the proposed deal, the San Francisco company’s board of directors would not pay a financial penalty but would be required to adopt greater oversight of corporate strategy and risk, and enhance controls and disclosures. For example, if the board intends to add a member, it would have to add an independent director and consider diversity in doing so. The board would also create an independent chief compliance officer position responsible for maintaining a system for reporting and investigating potential compliance concerns.
The only financial results of the lawsuits would be a $38 million payment to Twitter from its insurers, to be used for general corporate purposes, and some administrative costs for Twitter, according to filings. The lawsuits, the oldest of which stems from 2017, were pending in the Court of Chancery of the State of Delaware and the U.S. District Court for the District of Delaware.
The settlement was reached after years of litigation and a couple of mediation sessions last year that included the company providing the plaintiffs with internal documents. Besides Twitter (NYS:TWTR) , the individuals named in the lawsuits include Chief Executive Jack Dorsey and former CEOs Dick Costolo and Evan Williams. Other plaintiffs include former Chief Financial Officer Anthony Noto, now CEO of SoFi, and current board Chairman Patrick Pichette and board members Omid Kordestani, Martha Lane Fox and Bret Taylor.
Under the settlement, the plaintiffs continue to deny the charges against them and do not admit liability or wrongdoing. According to the settlement agreement , the plaintiffs believe the terms directly address their complaints and are in the best interests of Twitter and its shareholders.
A court settlement hearing has been set for March 19.