Technology leaders attend Donald Trump's presidential inauguration in the rotunda of the U.S. Capitol in Washington, DC, on Jan. 20.SHAWN THEW/Reuters
Alissa Kole is the managing director of Govern Center.
Once dominated by financial, natural resource and industrial firms, the global economy has been fundamentally reshaped by Big Tech. As its influence grows more unbridled, its oversight is essential. With a combined market value exceeding US$7-trillion, FAANG (Facebook META-Q, Apple Inc. AAPL-Q, Amazon.com Inc. AMZN-Q, Netflix Inc. NFLX-Q and Alphabet Inc./Google Inc. GOOGL-Q) has become an integral part of the lives of billions of people.
More than 37 per cent of the world’s population currently utilizes Facebook, while 35 per cent utilizes Google, shaping how people connect, shop and vote. These primarily American firms are now “too big to fail,” a label previously reserved for banks. Yet they are also too big to continue in their current modus operandi.
The rise of Big Tech – arguably beyond the reach of nation-states – first became evident during the Arab Spring revolutions. Its influence was further underscored in the 2016 U.S. elections, which were marred by Russian interference, and by Russia’s 2022 ban of Instagram.
Amid political shifts in the U.S., tech firms have scaled back already insufficient governance. Facebook parent Meta recently dismissed fact-checkers and dissolved its “responsible innovation team.” After acquiring Twitter, Elon Musk disbanded its content moderation team.
With many Big Tech firms pioneering AI solutions, their potential for spreading misinformation and even inciting violence is further exacerbated. Meanwhile, Apple and Disney have vigorously resisted investor pressure to disclose how they use AI, until last year the Securities and Exchange Commission (SEC) ruled otherwise.
Since the election of the new U.S. administration, governance requirements around disclosure and diversity have been swiftly weakened. Even before that, standards were already insufficient for Big Tech’s unique challenges.
Snapchat went public in 2017 without offering any voting rights to shareholders – a first-of-its-kind in the history of capitalism. Meta, a company whose valuation at one point stood at US$1-trillion, is controlled by a single shareholder. Mr. Musk has gone further, taking Twitter – now X – private and disbanding its board of directors in 2022, despite having been sanctioned by the SEC four years earlier for misleading Tesla Inc. TSLA-Q investors about taking it private.
A fundamental challenge in the governance of Big Tech firms is multiple-class share structures, which allow their founders to control them in a way that overrides any and all shareholder, employee or other stakeholder concerns. For instance, Alphabet’s dual-class share structure gives its CEO 10 times the voting power of other shareholders. While Meta’s CEO owns less than 15 per cent of the company’s stock, he has a controlling vote.
The International Corporate Governance Network, representing US$77-trillion in assets under management, has long opposed these practices and has called for sunset clauses, limits on voting ratios and share restrictions for directors. Three years ago, the Shareholder Commons sued Meta’s board, citing harm to democracy and investor portfolios, but lost.
At the same time, policy makers – primarily tackling the influence of Big Tech with tax and competition tools – have not been able to achieve more. Five years ago, after a lengthy investigation, the U.S. Report on Competition in the Digital Marketplace suggested breaking up the monopolies created by Amazon, Facebook, Apple and Google. Since then, the opposite has occurred, with Meta in particular consolidating more power.
With greater industry consolidation, governance deregulation in the U.S. and the rise of AI tools, internationally accepted corporate governance regulations are urgently needed. The good news is that there are precedents: The Basel Committee on Banking Supervision hosts an international standard of governance for that sector, while the OECD hosts globally recognized guidelines for the governance of state enterprises.
These standards demonstrate that some firms require tailored oversight. Big Tech governance should address multiple-class share structures, stakeholder input and corporate AI reporting – risks still outside effective oversight. The new standard should also address emerging issues.
While still rare, the presence of AI members on boards of directors, such as the participation of Aiden Insight on the board of Abu Dhabi’s International Holding Company, raises important legal and governance challenges that remain entirely unaddressed. Likewise, with less than a third of the S&P 500 disclosing the role of boards in overseeing AI in 2024, clear regulatory principles are needed.
The OECD, as the host of an international “gold standard” of corporate governance, appears to be optimally positioned to host such a global regulation. The challenge is that its negotiation would require significant compromises among American, Chinese and European interests, which for the foreseeable future are not aligned, especially on the role of Big Tech as a key contributor to the global economy.