Opinion

Lucy P. Marcus

Facebook versus the Shareholder Spring

Lucy P. Marcus
May 17, 2012 18:43 UTC

The corporate world is emerging from several weeks of boardroom turbulence dubbed the “Shareholder Spring.” In annual meeting after annual 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 organization. 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 toward 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 groundbreaking, 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.

In the Boardroom with early-stage companies

Lucy P. Marcus
May 16, 2012 17:54 UTC

In this edition of “In the Boardroom with Lucy Marcus,” Lucy Marcus and Axel Threlfall are joined by the CEO of technology startup PeerIndex, Azeem Azhar, to talk about what the boards of early-stage companies should look like and do.

Early-stage companies anywhere in the world need to think about integrating good board principles from the start. If an entrepreneur plans to expand the business into a strong entity with real longevity, then it is more important than ever to get the foundations of that business right and build best practices into the very DNA of the company. One crucial area that will pay real dividends is ensuring that the company has a strong, committed, well-functioning board.

Even at an early stage, the discipline that comes with following the skeleton of corporate governance – having regular board meetings, putting together the documents for board meetings, having people around the table who ask challenging questions about both “grounding” and “stargazing” issues, and having independent, non-invested, non-aligned directors involved – sets important precedents for the future of fast-growth companies and helps build strong organizations for the long term. Boards composed of truly active, engaged and interested directors bring benefits, no matter the size of the organization.

In the Boardroom with the Shareholder Spring

Lucy P. Marcus
May 4, 2012 15:14 UTC

In this edition of “In the Boardroom with Lucy Marcus,” Axel Threlfall talks to Lucy about the “Shareholder Spring.”

If the past couple of weeks of annual general meetings (AGMs) around the world haven’t sent a strong signal to boards about the way investors and other stakeholders are feeling, it is hard to know what will.

Remuneration levels for CEOs and members of the C-suite have been a hot button issue for Barclays, AvivaUBS, Citigroup, AstraZeneca, Shell and other companies. In meeting after meeting, investors stood up to challenge remuneration committees about their decisions and decision-making process. Stakeholders also asked some pointed questions about corporate social responsibility. With Apple and Foxconn on their mind, they asked about a wide spectrum of areas from global working practices to wages to conflict minerals.

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