Elon Musk, the world’s richest man, is on the verge of acquiring one of the world’s most significant publishing platforms by a hair’s breadth. That sentence is extraordinary in and of itself. The second component of his proposal to buy Twitter Inc. is the most concerning: he will be answerable to no one but himself.
When Tesla goes private, the company’s board of directors can be dissolved. If he doesn’t, any board that survives will most likely be toothless. That’s nothing new in the tech world, where checks and balances are frequently disregarded. Nonetheless, this practise is having progressively negative consequences.
Thanks to the way they arranged their initial public offerings and voting shares during the last decade, Big Tech pioneers like Mark Zuckerberg and Alphabet Inc.’s Sergey Brin and Larry Page have fashioned themselves into modern-day corporate autocrats.
Zuckerberg has the majority of voting shares in Meta Platform Inc., while billionaires Brin and Page own 51 percent of a special class of Alphabet voting shares, giving them complete control over Google and YouTube. This dual-class share structure is uncommon in business but ubiquitous in the tech field, and it is supposed to provide company founders the freedom to pursue their long-term goals. Due to dual-class structures, the founders of Airbnb Inc. and Snap Inc. each enjoy around 44 percent voting control of their respective companies. While Musk owns only 20% of Tesla Inc., his board of directors includes longstanding pals such as Larry Ellison and Elon Musk’s brother, Kimbal Musk.Zuckerberg’s board also has largely done his bidding over the years.
All of this goes against modern corporate governance theories, which maintain that stringent accountability is beneficial. According to David Yoffie, a leadership expert at Harvard Business School who spent nearly three decades on the board of Intel Corp, without those checks, tech leaders are free to make rash decisions.
Those judgments might sometimes be beneficial to a company’s bottom line. For example, when Mark Zuckerberg paid $1 billion for Instagram in 2012, it had no revenue — and he didn’t ask his board for permission. Instagram contributed $20 billion to Facebook’s annual sales seven years later.
Consider it from a different perspective. Several studies have linked the rise of Instagram under Zuckerberg’s leadership to increasing rates of despair, anxiety, and suicide among teenagers, particularly teen girls. The site has made a lot of money, but it has also caused psychological harm to children and adults, according to Facebook’s own study.
Shareholders, too, can suffer long-term from unrestricted control. With the metaverse, Zuckerberg led Facebook into aggressively pursuing an abstract commercial aim. While the strategy may pay off in the long run, it has already cost the corporation $10 billion. Since the beginning of the year, Meta’s stock has dropped by 40%. Why isn’t he transforming Facebook into a more secure platform that can last for years? Because no one has pressed him to do so, not from his adoring lieutenants or his obedient board.
Musk’s Twitter move is also difficult to reconcile with the concept of fiduciary responsibility. He isn’t interested in purchasing Twitter to improve its business — “I don’t care about the economics at all,” he recently stated — but rather to actualize his views about free speech. Tesla’s stockholders are now bearing the brunt of the loss. Tesla’s stock has lost over a quarter of its value in the last three weeks as Musk borrowed more than $25 billion against the company as security. If Musk sells a portion of his investment to fund his personal agenda, the stock price will plummet much further.
Maybe it’s just difficult to remember your financial duties when you’re a millionaire. It’s easy to get sucked into seeking the realisation of your ideological or futuristic viewpoint when you work in an industry that idolises visionaries. Perhaps the millionaires who control today’s social media sites require more stringent controls.
That is absolutely possible. Dual-class listings may be phased out in the future, as many institutional investors have requested, but fundamental changes take time. Meanwhile, regulators have been talking harsh, but Musk and others may easily ignore them. He has repeatedly snubbed the SEC, and he will most likely avoid European social media legislation that threaten, in principle, to stifle his free speech objectives.
For better or worse, other billionaires are the clearest remedy right now. Apple Inc., led by billionaire Tim Cook, had the most impact on Facebook’s unethical data-collection techniques to date, when it allowed customers to opt out of being tracked by Zuckerberg’s company. With its immensely addicting TikTok app, ByteDance, which has been run by billionaire Zhang Yiming for years, also threatens to entice users away from Facebook and Musk’s Twitter.
That is not how things should be, but in a world where millionaires are shaping social media, their competitors may be our only hope.