Musk can dissolve Twitter’s board when he takes the company private. If he doesn’t, any board that remains probably won’t have teeth. That’s nothing new in tech, where checks and balances are often passé. Even so, that trend is having increasingly damaging repercussions.
Big Tech founders like Mark Zuckerberg and Alphabet Inc.’s Sergey Brin and Larry Page have fashioned themselves as modern-day autocrats of business, thanks to the way they have structured their initial public offerings and voting shares over the past decade.
Zuckerberg owns the majority of Meta Platform Inc.’s voting shares, while billionaires Brin and Page control 51% of a special class of voting shares of Alphabet, giving them ultimate control of Google and YouTube. This dual-class share structure is unusual in business but common in the tech world, thought to give startup founders freedom to execute their long-term vision. The founders of Airbnb Inc. and Snap Inc. both have about 44% voting control of their respective companies thanks to dual-class structures. And while Musk owns just 20% of Tesla Inc., his board is stacked with longtime friends like Larry Ellison and Kimbal Musk, Elon Musk’s brother. Zuckerberg’s board also has largely done his bidding over the years.
All of this runs counter to modern ideas of corporate governance, which hold that strict accountability is a good thing. Without those checks, tech leaders are free to make capricious decisions, according to David Yoffie, a leadership professor at Harvard Business School, who spent close to three decades on the board of Intel Corp.
Sometimes, those decisions can be good for business. For instance, when Mark Zuckerberg bought Instagram for $1 billion in 2012, the tiny target had no revenue — and he didn’t ask his board for permission. Seven years later Instagram was contributing $20 billion to Facebook’s annual sales.
Discover the stories of your interest
But look at it another way. Multiple studies have shown that the rise of Instagram, under Zuckerberg’s stewardship, has correlated with higher rates of depression, anxiety and suicide among teenagers and teen girls in particular. The site has made oodles of money but also caused psychological damage to children and adults, which Facebook’s own research has corroborated.
Long-term, shareholders, too, can suffer from unfettered control. Zuckerberg steered Facebook into obsessively chasing an abstract business goal with the metaverse. While the initiative might eventually bear fruit, for now the move has already cost the company $10 billion. Meta’s stock has dropped 40% since the start of this year. Why isn’t he reshaping Facebook into a safer website that can thrive for years to come? Because no one, either from his team of sycophantic lieutenants or his deferential board, has pushed him to.
Musk’s move on Twitter also is hard to square with the concept of fiduciary responsibility. He doesn’t want to buy Twitter to make it a better business — “I don’t care about the economics at all,” he recently said — but to realize his ideas about free speech. Now Tesla’s shareholders are paying the price. As Musk borrowed more than $25 billion against Tesla as collateral, the carmaker’s shares have lost almost a quarter of their value in the past three weeks. If Musk sells part of his stake to keep supporting his personal agenda, that will depress the share price even more.
Maybe it’s just hard to remember your obligations to make money when you’re a billionaire. Maybe when you’re in an industry that idolizes visionaries, it’s easy to get lured into chasing the realization of your ideological or futuristic worldview. Maybe the billionaires who control today’s social media platforms actually need stricter checks and balances.
That’s certainly doable. Dual-class listings could eventually be phased out, as many institutional investors have already called for, but structural changes can take years. Regulators, meanwhile, have been talking tough, but they are also easily ignored by the likes of Musk. He has thumbed his nose at the SEC multiple times and will likely skirt the European social media laws that threaten, in theory, to disrupt his free speech plans.
For better or worse, the clearest remedy right now is other billionaires. The biggest impact on Facebook’s unscrupulous data-collection practices to date has come from Apple Inc., helmed by billionaire Tim Cook, when it allowed customers to block Zuckerberg’s company from tracking them. ByteDance, run for years by billionaire Zhang Yiming, also threatens to lure users of Facebook and Musk’s Twitter away with its highly addictive TikTok app.
That is not how things should be, but in a world where social media is being shaped by freewheeling billionaires, their rivals may be our only hope.
