Leadership crisis

Why the leadership at Uber, Snapchat and Twitter looks weak and wobbly

Tech firm CEOs keep control by holding investors at arm’s length. It is damaging corporate governance.

Silicon Valley has not had a great year for governance, and ride-sharing business Uber has been struggling more than most. The company’s culture has come under sustained attack for macho and sexist elements leading CEO Travis Kalanick to fire staff and hire brand image specialists in a bid to convince the world the company is cleaning up its act.

Now, the Uber board has adopted a series of recommendations designed to address the firm’s culture and practices. Details of the report from former US attorney general Eric Holder, were not initially revealed, but it has already sparked the departure of senior vice-president Emil Michael, an ally of Kalanick. Some reports have suggested Kalanick could be asked to go on leave for a spell himself.

It’s not the only bump in the road. Uber was forced into a costly exit from China where it had spent at least $2 billion. And Google is now suing them for driverless car patent infringement and the alleged theft of secrets. The business continues to lose money and local competition is strengthening in many of Uber’s markets. Simply put, would Kalanick still be there if he did exert tight control over the privately-held shares and was able to block any uprising?

There have been issues too over at Snap Inc, owner of social network Snapchat. The firm has tried to explain poor performance since it floated its shares by complaining that Facebook is copying everything it does – hardly unusual behaviour in competitive markets. After the float, CEO Evan Spiegel immediately gave himself $750m of stock and his colleagues the rest of $2 billion stock, all without qualifying loyalty restrictions.

So what is going on with leadership among the tech elite? This last year, social networks LinkedIn and Twitter, and internet giant Yahoo, have all put themselves up for sale after attracting substantial user traffic which they failed to monetise. Are these also leadership failures?

Keeping control

Perhaps one clue lies with Snap, which floated at a valuation exceeding $20 billion when its 2016 revenue was just $400m, losses came in at more than $500m and its user growth was slowing. Investors were essentially buying a lottery ticket as the issued shares did not carry votes. This meant they would have no influence over strategy or on the leadership, or, indeed, on what the leadership choose to pay themselves. The 26-year-old Spiegel and 28-year-old chief technical officer, Bobby Murphy, have a tight grip on control through their voting founder shares. Clearly whatever the future for Snapchat, they won’t be leaving in a hurry.

It is rare that entrepreneurs continue to lead their business once it moves into a strong growth phase and achieves maturity. The need for funds to develop the business requires outside funding which, due to the extent of risk, is provided by venture capital in return for voting equity. In turn, they usually move aside the entrepreneur to a product development role to be replaced by a more experienced CEO who can manage the introduction of systems, processes and structure.

The CEO will also have the delicate job of managing stakeholder interests and business reputation. Through experienced CEOs and chairmen, shareholders can ensure the rapid development of the business without major distraction through unproductive diversification or impulsive lurches towards high-risk business areas.

A business goes through various stages. From start up to rapid acceleration; to maturity, perhaps a turnaround, and for many, eventual demise. Each stage creates very different demands for leadership which are usually met by different leaders with appropriate skills for the stage the business is in.

Entrepreneurs rarely make it through the acceleration phase to maturity. That’s the point at which point most businesses recruit an outside CEO. Mark Zuckerberg at Facebook and Bill Gates at Microsoft were significant exceptions to that rule. However if entrepreneurs can retain adequate voting rights to block any challenge, then they typically hang on to power as long as they can. There are plenty of exceptions, but these norms are quite persistent.

Investor power

Jack Dorsey is a serial founder of technology businesses including Twitter and, more recently, Square. He has held the CEO role at both Twitter and Square at a time when Twitter has struggled. User growth has only very recently shown any sign of rallying, and the share price has stagnated. As investors are unlikely to contribute further funds, a first round of redundancies totalling 10% of staff has just been completed. These may not be the last. Meanwhile Dorsey is promoting his more recent interest in Square, which processes card payments and in which he is believed to hold about a quarter of the equity.

No one disputes Dorsey’s entrepreneurial eye for technology opportunities or ability to rapidly exploit opportunities. But can he deliver two long-term, thriving, focused businesses which know what they are good at? He may be a serial starter of businesses, but should he be running failing mature businesses when clearly his interests are elsewhere?

Whatever your answer to those questions, at least Twitter and Dorsey, and co-founder Ev Williams, have put in place a one share one vote structure. Elsewhere, Silicon Valley investors appear to have accepted the new norm of buying shares which lack the rights to dislodge the CEO if performance is failing. Uber remains privately held and so management retains control, but many public tech sector floats – including Google, Facebook, LinkedIn, and now Snapchat – protect the founders with either protective article clauses or privileged shares. So why are investors willing to pay for shares, in private companies or public, which have limited rights?

We can look back to the global financial crisis for the fundamental reason. The era of cheap money and low interest rates that followed has made it almost foolhardy to watch as your money stagnates in the bank. A ticket in the lottery, even with very long odds, is tempting for investors hoping for another Amazon, Google or Facebook, even if they are setting themselves up for longer term disappointment. Silicon valley investors should be ready to assert their power as the money behind tech sector growth. Voting rights would keep mercurial founders on the straight and narrow, work in those investors’ best interests – and make corporate governance less of a lottery while we’re at it.

John Colley, Professor of Practice, Associate Dean, Warwick Business School, University of Warwick.

This article first appeared on The Conversation.

We welcome your comments at letters@scroll.in.
Sponsored Content BY 

What’s the difference between ‘a’ washing machine and a ‘great’ washing machine?

The right machine can save water, power consumption, time, energy and your clothes from damage.

In 2010, Hans Rosling, a Swedish statistician, convinced a room full of people that the washing machine was the greatest invention of the industrial revolution. In the TED talk delivered by him, he illuminates how the washing machine freed women from doing hours of labour intensive laundry, giving them the time to read books and eventually join the labour force. Rosling’s argument rings true even today as it is difficult to deny the significance of the washing machine in our everyday lives.

For many households, buying a washing machine is a sizable investment. Oddly, buyers underestimate the importance of the decision-making process while buying one and don’t research the purchase as much as they would for a television or refrigerator. Most buyers limit their buying criteria to type, size and price of the washing machine.

Visible technological advancements can be seen all around us, making it fair to expect a lot more from household appliances, especially washing machines. Here are a few features to expect and look out for before investing in a washing machine:

Cover your basics

Do you wash your towels every day? How frequently do you do your laundry? Are you okay with a bit of manual intervention during the wash cycle? These questions will help filter the basic type of washing machine you need. The semi-automatics require manual intervention to move clothes from the washing tub to the drying tub and are priced lower than a fully-automatic. A fully-automatic comes in two types: front load and top load. Front loading machines use less water by rotating the inner drum and using gravity to move the clothes through water.

Size matters

The size or the capacity of the machine is directly proportional to the consumption of electricity. The right machine capacity depends on the daily requirement of the household. For instance, for couples or individuals, a 6kg capacity would be adequate whereas a family of four might need an 8 kg or bigger capacity for their laundry needs. This is an important factor to consider since the wrong decision can consume an unnecessary amount of electricity.

Machine intelligence that helps save time

In situations when time works against you and your laundry, features of a well-designed washing machine can come to rescue. There are programmes for urgent laundry needs that provide clean laundry in a super quick 15 to 30 minutes’ cycle; a time delay feature that can assist you to start the laundry at a desired time etc. Many of these features dispel the notion that longer wash cycles mean cleaner clothes. In fact, some washing machines come with pre-activated wash cycles that offer shortest wash cycles across all programmes without compromising on cleanliness.

The green quotient

Despite the conveniences washing machines offer, many of them also consume a substantial amount of electricity and water. By paying close attention to performance features, it’s possible to find washing machines that use less water and energy. For example, there are machines which can adjust the levels of water used based on the size of the load. The reduced water usage, in turn, helps reduce the usage of electricity. Further, machines that promise a silent, no-vibration wash don’t just reduce noise – they are also more efficient as they are designed to work with less friction, thus reducing the energy consumed.

Customisable washing modes

Crushed dresses, out-of-shape shirts and shrunken sweaters are stuff of laundry nightmares. Most of us would rather take out the time to hand wash our expensive items of clothing rather than trusting the washing machine. To get the dirt out of clothes, washing machines use speed to first agitate the clothes and spin the water out of them, a process that takes a toll on the fabric. Fortunately, advanced machines come equipped with washing modes that control speed and water temperature depending on the fabric. While jeans and towels can endure a high-speed tumble and spin action, delicate fabrics like silk need a gentler wash at low speeds. Some machines also have a monsoon mode. This is an India specific mode that gives clothes a hot rinse and spin to reduce drying time during monsoons. A super clean mode will use hot water to clean the clothes deeply.

Washing machines have come a long way, from a wooden drum powered by motor to high-tech machines that come equipped with automatic washing modes. Bosch washing machines include all the above-mentioned features and provide damage free laundry in an energy efficient way. With 32 different washing modes, Bosch washing machines can create custom wash cycles for different types of laundry, be it lightly soiled linens, or stained woollens. The ActiveWater feature in Bosch washing machines senses the laundry load and optimises the usage of water and electricity. Its EcoSilentDrive motor draws energy from a permanent magnet, thereby saving energy and giving a silent wash. The fear of expensive clothes being wringed to shapelessness in a washing machine is a common one. The video below explains how Bosch’s unique VarioDrumTM technology achieves damage free laundry.

Play

To start your search for the perfect washing machine, see here.

This article was produced by the Scroll marketing team on behalf of Bosch and not by the Scroll editorial team.