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The corporate world is emerging from several weeks of
boardroom turbulence dubbed the “Shareholder Spring”.
In yearly meeting after yearly meeting around the world,
boards have been taken to task by investors and other stakeholders on a wide
range of issues: remuneration, board composition, competence, diversity, voting
control, dual stock, and more.
In the meantime, we have also witnessed the soap opera of
Yahoo’s boardroom, the rebuke to newly public Groupon’s board for its lack of
oversight of accounting practices and the public condemnation of News
International’s chair – and, by extension, its board – questioning his competence
to lead the organisation.
No sector has been immune; no director has been untouchable.
Now Facebook is about to enter the public markets.
Its defiant position regarding its old-style governance is
in stark contrast with the temper of the Shareholder Spring.
Facebook swims against the tide of a global movement towards
transparency, engagement, and checks and balances.
It feels as if we’ve all stepped into a time machine and
none of the past couple of years of governance lessons – including the failures
of boards in the banking sector crisis – ever happened.
Several troubling issues call into question how this company
can consider itself ground-breaking, innovative or new: the concentration of
power in the hands of one man, the stranglehold on voting rights, the lack of
diversity in the boardroom (which in a way is inconsequential, as the Facebook
board does not have much bite anyway), and above all else the flagrant
disregard of the lessons of the past several years about engaged, active and independent
boards contributing to strong companies.
Were Facebook striving to be an innovative company built to
last, it would encourage healthy dialogue and diversity in the boardroom, and
equal shareholder voting rights.
It would not need to lock in power, but rather earn
authority through excellent performance and results.
The leadership would trust that a democratic boardroom would
foster greater strength and stability than dictatorship, which brings a false
sense of security.
That’s a lesson we can take from the Arab Spring, where
dictators thought that they held real control.
Today there is euphoria, anticipation and excitement among
investors.
A lot of people will make money in the short term, but
short-term investing is not what builds strong businesses and strong economies.
The world needs durable companies that are innovative in the
products and services they sell, but also distinguish themselves through
responsive and responsible conduct in their corporate governance structures and
business practices.
Over the years Facebook will need to grapple with many
issues that affect the development of the company and the lives of its users,
from growth to innovating ahead of the curve, and from privacy to social
responsibility.
My hope is that Mark Zuckerberg begins to see the value of
ceding some of the control he holds by rule and is able to trust that he will
be able to earn that control through deed.
If that doesn’t happen, all eyes will be on the investors to see if at least they have learned the lessons of bad governance and the value of good.
