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The People’s Corporations

LONDON – Two big power shifts are occurring around the world today. First, corporate power is growing relative to that of governments. Second, ordinary people are also gaining greater influence. What does it mean that these seemingly contradictory shifts are happening simultaneously?

There is, no doubt, more power in the hands of companies than ever before. People who have not been popularly elected control more and more of our daily lives – from entertainment and energy supplies to schools, railways, and postal services. At the same time, the speed of technological innovation is outpacing that of legislation, meaning that corporate activities are routinely entering seemingly gray areas devoid of regulation.

But, counterbalancing this trend, people now have the means and opportunities to ensure that companies’ behavior does not go unchecked. They are becoming more educated and aware of how companies operate, and they are more proactive and outspoken when they believe a company has crossed the line. The public increasingly acts as the conscience of companies and industries, asking hard questions and holding them to account.

In the past several years, more effective means of collective action – such as social media, open publishing platforms, and online video sharing – have given people more levers to pull. As people pursue boycotts and disinvestment, lobby for legislation, and activate social-media campaigns with growing sophistication, they are increasingly able to influence companies’ operational and strategic decision-making, thereby imposing checks and balances on today’s enormous accretions of private power.

For some companies, this has come as a thunderbolt. Consider the British Petroleum oil spill in the Gulf of Mexico in 2010. The BP spill was one of the first instances in which companies were forced to contend with the power of social media – and in which people realized the potential of the tools at their disposal. Like most companies at the time, BP was accustomed to communicating with traditional seats of power – the White House, the Kremlin, and so on – and to doing so via traditional modes of communication, such as briefing carefully selected journalists and distributing precisely worded press releases.

The Gulf oil spill changed all of that. Communities united around an issue and found a voice on Facebook. There was a massive conversation going on, and BP was neither a part of it nor able to control it via traditional communication-management methods.

Since then, there has been a marked increase in this sort of direct action. Social media spread ideas in an immediate and unfettered manner. A document, an image, or a video is shared, and suddenly what was secret or shielded is globally exposed. And, though wrong or false information spreads just as quickly as true information, corrections are often swift as well.

For younger people today, using social media as a tool for activism is second nature. They are fluent in using YouTube, Twitter, Facebook, and Reddit to communicate and create a community around an idea, issue, or objection – and to nurture the growth of a small group into a mass movement. And older people are not far behind.

As corporate power rises, holding companies to account becomes increasingly important. The scope of accountability must expand as well, in order to affect the behavior of executives and non-executives alike. And companies’ board members will be increasingly held to account for how well they hold senior management to account.

With all of that comes a culture of questioning that which was previously unquestioned – including how companies are run and whether an organization’s actions are ethical. Any action can be questioned by anyone, and if others find it interesting or important, the question will spread – and not just within a small community or a specialist group, but more broadly and around the world.

This shift has changed the nature of activism and collective action. It has also made for new kinds of allies, with activist investors like Carl Icahn tweeting their intentions and markets responding. Likewise, those who in other circumstances might see activist investors as natural adversaries can agree with the positions that they take, such as concerns about executive compensation or corporate social responsibility.

Activist investors can write open letters that may not be picked up by mainstream media outlets, but that can go viral on Twitter or Reddit. This is often enough to make boards and executive committees sit up and take notice.

Corporate leaders who embrace this new reality, view it as an opportunity, and resist the inclination to “manage” or avoid issues will have a competitive advantage. They will not regard meeting people where they are as a way to manipulate them, but as an opportunity to hear what they are saying. Their first impulse will not be to figure out how to use modern means of direct communication to persuade customers, employees, and other stakeholders to think and do the things that they want them to think and do. Instead, they will make real changes – and they will be better off for it.

Companies make our cars, our phones, and our children’s textbooks – and exercise increasing control over the daily lives and destinies of people worldwide, not only those who use their products, but also those who work for them and those who live in the communities where they are based. If companies do not take seriously the responsibility that comes with their great and growing power, people will be there to remind them.

Lucy P. Marcus is CEO of Marcus Venture Consulting.

Copyright: Project Syndicate, 2014.

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