Home > Corporate Governance Systems > Corporate Governance and the Sharing Economy

Corporate Governance and the Sharing Economy

In a world of robots interacting with humans and learning out of the process, while connected with all other robots in a network; in a world of artificial intelligence, disruptive technologies and new business models arising from them; in this world regulation starts to change: why do we need CFA`s in a world where financial advise is produced with algorithms? In this world firms also start to reject IPOs fearing their innovation capacities would fade away, (Uber, Airbnb, …), or introduce dual-class share systems to keep control on it and the long-term perspective.

Mark Fenwick and Erik P.M. Vermeulen in a paper called “How the Sharing Economy is Transforming “Corporate Governance”, (1) refer to the new changes Corporate Governance faces and needs if boards are to gather survival and success for their companies.

For them what is relevant is whether these new big companies are able to develop a system that is inclusive of all stakeholders, (shareholders interests, oversight, and other currently accepted needs fall apart).

Screenshot - 14_05_2017 , 21_05_35

(Source (1))

They describe five changes in that sense:

  1. Inclusive culture. The firm´s ecosystem of the future seems to be one with lower internal contracts and more cooperation, sharing, co-investment, co-innovation, …so that hierarchy and control loose relevance. What is critical is the capacity to leverage on the forces of all these participants. Netflix, Airbnb, Uber, Spotify, …even GE have built into broad platforms where all these agents plus consumers interact. Instead of assets and goods, trust and value is produced. It is not seniority anymore which provides success but the “best idea wins” approach.
  2. Investment in Innovation. In a world of ultra-fast change, of ultra-weak loyalty by customers, innovation in or out of the core business is necessary, so that many companies reject the usual shareholder pressure for dividends, share buybacks, so as to heavily invest instead.
  3. Communication leadership. Direct dialogue through social media and other tools adapt better to our millenials´direct culture and to the new ecosystem. A more direct, interactive and less top-down language is often used by these companies.
  4. Data-driven decision-making. In these environments, technologists, technical visionaries are critically needed in the boards to keep companies up in these new times as described above.
  5. Embedding technology in Corporate Governance. Leaders need to be updated (even before they arrive) about every new technology that is able to fastly and radically transform a firm.

Is a new Corporate Governance framework possible without companies incurring in all previous mistakes linked to a lack of oversight and transparency? This is perhaps the challenge.

(1) Fenwick, Mark and Vermeulen, Erik P. M., How the Sharing Economy Is Transforming ‘Corporate Governance’ (April 3, 2017). Lex Research Topics in Corporate Law & Economics Working Paper No. 2017-2. Available at SSRN: https://ssrn.com/abstract=2945294

 

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