The bosses who are too powerful for anyone’s good
Mark Zuckerberg, Ray Kelvin and Ivan Glasenberg dominate their businesses but as troubles mount they become part of the problem
The best new year’s resolution, so they say, is to never make a new year’s resolution at all. Mark Zuckerberg must be feeling that way. After declaring in January that this was the year he would “fix Facebook”, he has achieved almost the complete reverse, with the social media giant looking more broken and desperate with each passing week.
The decision of MPs this week to release confidential documents that Facebook tried to keep secret is deeply embarrassing for Zuckerberg, revealing some of his personal interventions in cases where staff proposed cutting off data supplied to competitors. The cache of emails also suggested that while Facebook did not break its long-standing policy of not selling user data, it certainly wanted some form of “reciprocity” from partners.
It’s been a year of hell for Facebook, with scandals arriving almost every fortnight. But it is just the most high-profile example of a company dominated by a major shareholder and powerful chief executive that is struggling to react when things go wrong. Zuckerberg, with around 60pc of the voting rights, isn’t in danger of being toppled any time soon, despite the ire of some smaller investors at this year’s AGM.
Closer to home, retailer Ted Baker has been rocked by harassment allegations against its founder and biggest shareholder, Ray Kelvin, for his “forced hugs” policy. Shares fell 23pc over three days as investors weighed the possibility that the company might ultimately be forced to oust its driving creative force. The stock clawed back some of the ground yesterday after it promised to punt responsibility for investigating the claims to an external law firm.
Mining giant Glencore also has a powerful chief executive at the helm. Ivan Glasenberg is not the FTSE 100 company’s founder, but he has been intimately involved in shaping its direction since the Nineties and formally took the top job in 2002. He is the second biggest shareholder with an 8.6pc stake. Glencore announced a reshuffle of its top management earlier this week as it seeks to move on from corruption allegations relating to its activities in the Democratic Republic of Congo that have sparked a US legal investigation. That effort lasted all of two days before prosecutors in Brazil announced the company was under investigation on suspicion of paying bribes in the long-running “Car Wash” moneylaundering scandal.
The question for investors in all of these companies is: at what point does a visionary chief switch from being an asset to a liability?
Usually a tipping point arrives when it becomes clear the individual’s value has expired, or no longer outweighs the risk. The danger for companies such as the three above is that the corporate culture has become too entwined with one individual, or that the individual simply isn’t the right person to overhaul an entrenched culture. Are Facebook staff being tacitly encouraged to do things even when they know “the risk of PR fallout here is high”, as one staffer put it in an email released this week? Are Ted Baker workers being let down because the system gives them no redress? And has Glencore’s pushy corporate culture – with traders always seeking the best deal – resulted in actions that have crossed the line?
This brings us to the other big problem when powerful bosses are also major shareholders: their companies usually lack strong enough corporate governance to rein them in. So here’s an easy starting point for Zuckerberg’s new year’s resolution in 2019: if he wants to fix Facebook, he should announce plans to look at equalising the company’s dual stock, which gifts him disproportionate voting power, and give his board real clout to hold him to account. He won’t, of course, and so the blame for whatever happens next year will be laid squarely – and rightly – at his door.
‘The danger is that the corporate culture is too entwined with one individual’
Issuing an arrest warrant for a senior executive at one of China’s biggest companies while she is changing planes in Canada is a pretty effective way of getting people’s attention. The detention of Huawei’s Wanzhou Meng pending extradition to the US prompted the markets to tank, as investors rued a major escalation in the trade war between the US and China.
Reading the runes of the Trump White House is not easy, but it is worth noting the administration has a pattern of hitting out, waiting to see the impact, and adjusting the final penalty accordingly.
Witness the sanctions on oil exports from Iran; at the eleventh hour Trump, allowed eight of the biggest buyers of Iranian crude temporary waivers to carry on as before.
It’s possible the attack on Huawei is an opening gambit designed to force concessions on China over IP theft and spying that will result in diplomatic toing-and-froing and a compromise. There’s also evidence that US government departments are quite happy – perhaps even encouraged – to pursue seemingly contradictory ends; thus Meng was detained on the same day Trump and Xi had their supposedly trucebrokering steak dinner at the G20 summit. This will be scant consolation for the market, which tumbled a mere four days after celebrating an apparent détente. But if the US does not have a clear goal in mind, this might only be a taste of what’s to come.