The Facebook saga is really about corporate governance and democracy.
Corporate Governance isn’t a topic that’s of interest to many people. However the recent Facebook fiasco shows why we should all be a lot more interested. The Cambridge Analytica events, and Mark Zuckerberg’s subsequent appearances in front of Congress, highlight more than anything a failure of governance, and raise important questions about the role of companies in society and how we govern them.
It’s great that Zuckerberg appeared to take full responsibility for all the failures with his repeated ‘I’m sorry’ statements. He was obviously briefed well by his PR team.
But the truth is that in companies of this size actually it’s the Board that’s accountable. It’s interesting that they’re so silent right now.
As we all know, a Board’s job looks a bit like this:
- To manage performance of the CEO
- To own strategy, drive growth, manage the tensions between these objectives and both risk and ethics
- To set culture: how the company does things, how it behaves, what’s acceptable, what’s not, ensure policies and guardrails are in place
- To assure itself that fiduciary matters and legal responsibilities are given due consideration.
We all knew that the leaders of FB had never managed a company of this size before, that there was an element of ‘getting lucky’ that had thrust them into these lofty positions, and we all sort of assumed that there would be some seriously experienced people behind the scenes, who would be managing this appropriately - schooling the CEO, making sure that the right conversations were being had. Particularly once the company listed - after all the legal responsibilities to shareholders are significant once you go public.
This assumption appears to be incorrect.
The Facebook failures have been covered extensively in the press. At the heart of it, the truth is that this is so much more than a debate about a privacy breach - it’s actually about how we approach the unique set of questions that arise from the combination of thew new technologies being developed in Silicon Valley, and the high-stakes game of global domination being played, not just by Facebook, but by Apple, Google, and others.
- Basic integrity: Is the company chasing growth at all costs - over trust, over basic user privacy? Why isn’t Facebook honest with it’s users? The assertion by Zuckerberg that customers have opted in is disingenuous: there’s a huge difference between consent and informed consent. Facebook users had no idea what they were opting in for - they’re certainly not aware that in large parts of the company they’re considered to be ‘product’ to be monetised. The breaches here are not one-offs, they were clearly known by management, and they ran over several years - this speaks to the culture of the organisation. Does this mean that a fundamental lack of integrity is endemic in the whole organisation? If so, what does this say about it’s future?
- Ethical considerations around the impact of their platform: The ethical considerations around Facebook’s unique ability to affect, influence, and manipulate both individual and collective emotions, beliefs, and behaviours, to enable those who wish to play around with notions of truth, to blur fact with propaganda, to create a zeitgeist, to affect the outcomes of democratic elections, are enormous.
These questions go to the heart of company strategy, culture, and what they stand for. They therefore sit squarely with the Board. None of this will be solved by the remedial actions currently being taken by Facebook to show they’ve listened appropriately - this is PR, a smokescreen.
Why should we care?
Tech-driven companies like Facebook are re-making our world. They are global, extremely well-funded, and their power is immense: they are arguably already beyond the control of Government. And crucially, the very nature of the technology means that their ability to impact culture, opinion, and our social and economic worlds is on a scale we have never known before. And now too an apparent ability to impact political outcomes - Brexit, Trump - which goes to the heart of our democracies. When your platform can be used to change the course of history you become accountable to society, not just on home turf, but everywhere you do business. With this unique power comes a unique set of responsibilities. The issues deserve to be considered from a deeper perspective than simply the question of how to profit.
Even those who have been intimately involved in developing these platforms are now expressing concerns about their negative impact on individual happiness and the future of our society.
https://www.ted.com/talks/jaron_lanier_how_we_need_to_remake_the_internet
http://www.bbc.com/news/blogs-trending-42322746
The key people in these kinds of platforms are getting very rich indeed from our collective attention - this is what they’re selling and creating value from. There is a moral responsibility that comes with this.
Because this is just the first wave of many such debates we need to have. The ethical considerations around the coming onslaught of AI are mind-blowing in their complexity. We need the right structures in place to have oversight and control, without which huge decisions that affect all our futures are made by a small group of tech heads, VCs, and bankers, and lacking any ethical or moral imperative.
In the new world that’s emerging - tech-oriented and extremely globalised - Governments are increasingly impotent. And they lack the skills to provide effective oversight of companies like these: witness US Congress attempting to interrogate the issues last week. As members of society, we are all therefore dependent upon companies to balance doing right by shareholders, with doing the right thing by all of us - this means their Boards. Check out the Facebook board here. These are the select group making decisions that affect our world, and yet we don’t know them, we didn’t elect them, we can’t get rid of them. Which presents us all with a very interesting conundrum.
https://investor.fb.com/corporate-governance/default.aspx
The question of how these companies are governed is material to all of us.
There’s been debate for a long time about whether Boards and companies should be accountable to society or only to shareholders. This suddenly brings the debate into sharp focus. Current private sector Governance models say Boards are accountable only to shareholders, and they’re certainly not sophisticated enough to deal with the challenges of such globally-dominant behemoths.
So where do we go from here?
I would argue that this demands a review of fundamental ideas of Governance. I’m a huge advocate for private sector enterprise - it’s far and away the most effective structure we humans have invented to produce innovation, thought leadership and human progress. But it cannot be profit at all costs: with the central role enterprise now occupies in our world comes responsibility too.
We also need smarter people in Government. Checks and balances are fundamental to democracies. Government needs to get more effective - quickly - at being able to govern these huge organisations on our collective behalf. What we don’t want to result from all of this is knee-jerk regulation that comes right out the stone age and which stifles the kind of progress we want. We need intelligent law-making that recognises how the world has changed, and will keep changing, and which enables us to embrace the best of technology, and weed out what we don’t want.