The Purpose of a Board: Guidance in Staying True

Image-by-Gerd-Altmann-from-Pixabay

Facebook’s reputation turned over the course of two crises that changed the way many people see the impact of social media.

The first crisis was in 2011 when the Arab Spring uprising led to mass protests and upheaval around the Middle East. In regions where state media was in control, social media, especially Facebook, was credited with spreading “real” news and helping protesters stay in communication. Facebook was described as the “GPS” of the revolution.

When speaking to representatives of the G8 that year, Facebook founder and CEO Mark Zuckerberg downplayed the role that Facebook had played. A year later, after Facebook’s massive IPO, Zuckerberg changed his tune, saying:

By giving people the power to share, we are starting to see people make their voices heard on a different scale from what has historically been possible. These voices will increase in number and volume. They cannot be ignored. Over time, we expect governments will become more responsive to issues and concerns raised directly by all their people rather than through intermediaries controlled by a select few.

Through this process, we believe that leaders will emerge across all countries who are pro-internet and fight for the rights of their people…

The second crisis was in 2016. After the surprise election of Donald Trump as President of the United States, Zuckerberg ridiculed reports that the spread of fake news on the platform had helped Trump win. A year later, he announced he regretted dismissing the idea.

In the lead-up to the 2020 Presidential election, Facebook has been all over the map, declaring a hands-off approach to “fake news” at the beginning of the campaign, then agreeing to restrict and freeze ads leading up to the vote, and more recently warning of violent civil unrest post-election.

For a company whose mission is to “give people the power to make a community and bring the world closer together” that’s a complicated legacy.

Purpose Starts at the Top

Facebook is one of the most successful companies in history. Does purpose even matter to that growth?

I would argue that Facebook’s sense of mission did power its rise, and now hypocrisy around that purpose threatens its future.

In 2020, Zuckerberg ousted two Board members who disagreed with him on politics and social justice. A few months later, Zuckerberg’s likely successor resigned because he believed the company’s strategy of adopting encryption services would support criminal activity and terrorism.

To me, that type of leadership changeover is a bad sign.

Company’s need to be aligned around purpose at the top, or else the departments, business units, employees, and customers will be confused.

It starts with the Board. As the Financial Reporting Council’s Report on Corporate Culture and the Role of Boards, observes,

Establishing a company’s overall purpose is crucial in supporting the values and driving the correct behaviors. The strategy to achieve a company’s purpose should reflect the values and culture of the company and should not be developed in isolation. Boards should oversee both.

 

Most people think of Boards as concerned with selecting the CEO, setting broad strategic direction, overseeing performance vs. promises, compliance, executive compensation decisions, and providing advice from critical perspectives. However, the FRC report states that strong governance starts with selecting a CEO who fits the purpose and values, and will instill or support them throughout the company.

A recent McKinsey Report on “Demonstrating Corporate Purpose in the Time of Coronavirus” echoes that:

At a time of great uncertainty, “gut check” your decisions against your values as a leader and as an organization. Do your choices align with your identity? Everything you do now will be analyzed after the dust settles. Will your actions and identity be seen as consistent?

This is helpful support. In most companies, Boards provide more continuity than CEOs. They are responsible in every sense to the shareholders and stakeholders of the company.

The Challenges of Young Companies

But, as Facebook shows, when the CEO is also the founder and the majority shareholder of the company, that individual has great power and influence.

Because of the wild success of companies like Facebook, Amazon, and Google, many startups these days are launched with a strong sense of purpose. Staying true to that purpose is hard as the company grows.

A recent New York Times story highlighted that difficulty. The story focused on companies like Carta, which preached equality but treated employees poorly, or Talkspace, the meditation, and wellness app that stressed employees out, or Wing, a feminist workspace chain that fostered a toxic culture.

You could add UberZenefits, or the notorious Theranos to the list.

The lesson is that startups, however idealistic they seem, are still corporations. While many young entrepreneurs may look at Boards as stodgy, money-focused, and impediments to innovation, the opposite can be true.

At their best, Boards can help startups grow in line with purpose. And that’s where true innovation lies.

Purpose and Innovation

I’ve long argued that corporate purpose isn’t just a social good, it’s a business imperative because purpose drives innovation and growth. When companies have a purpose it can guide them to figure out what the needs of the world are and to build businesses or business lines to fill those needs.

Here’s a recent example I love.

Walmart’s purpose is to “save people money so they can live better.” It does this by selling just about anything at “low low” prices in its big box stores. But Walmart has been criticized for lack of healthcare for its low-paid employees. In answer to that, Walmart has recently gotten into healthcare in a big way.

Like other big retailers, Walmart began providing healthcare services in its stores, but Walmart broke the business model by offering those services at very low prices, such as $30 for teeth cleaning, $40 for primary care visits, or $4 for prescriptions.

More recently, Walmart is rolling out healthcare superstores that cater to comprehensive health needs and has also gone into COVID testing. Considering that Walmart’s customer base is the very people most in need of low cost, convenient, accessible healthcare services, and it’s clear how brilliant that strategy might turn out to be in terms of creating future growth.

It’s a strategy, however, that only makes sense in the light of Walmart’s purpose.

That’s what a Board can and should do: support leadership in lining up purpose and business strategy. Sometimes that means the Board may conflict with a CEO who wants to take the company in a new direction that doesn’t fit. But, in the best circumstances, the Board will be the foundation for a great run of innovation and growth driven by purpose.

CT/Sep 20

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