It is a paradox that a country that sought freedom from a king, the United States, is today happy to crown monarchs in commerce. Snap, which calls itself a camera company but is in fact a Silicon Valley firm behind a mobile messaging app, floated on the US stock exchange making billionaires of its two under-30 founders. True, 158 million people open the Snapchat app an average 18 times a day. But money and influence are not the only issues here. It’s also about unaccountable power. Snap’s initial public offering marks a turning point in US capitalism: it is the first time that the only shares on offer are those with no voting rights.
This form of techno-aristocratic capitalism means that the founders, 26-year-old Evan Spiegel and 28-year-old Bobby Murphy, will alone make the big decisions about Snap and maintain control over the social media phenomenon even if their employment is terminated. They could retire to an ashram in India or spend the rest of their lives writing haikus. No matter, they will still make every major decision for Snap, from appointing board members to a possible future sale. Only death will release the company from their control. Or if both sell more than 70% of their stock.
It’s bizarre that in a country founded on a repudiation of old-world aristocracy, investors are pouring money into creating a nouveau US version of an ancien regime European aristocracy in business, replicating its extravagant and unaccountable wealth. Snap is the worst example of this trend. Silicon Valley is now dominated by companies with weak or passive public shareholders. Many investors have been silly enough to hand over cash for little say in the running of tech titans such as Google, Facebook and Alibaba. Given how quickly today’s heroes are tomorrow’s zeros in technology, it seems foolhardy to cede control to listed companies that sometimes never make a profit or where incumbent managers cannot be fired to make way for new blood. Are investors so gullible that they believe the guff about new gods who see further than anyone else from Olympian-high pedestals – and are happy to get no dividends from their stock?
A greater democratisation of corporates needs the active participation of shareholders to restrain executive compensation and ensure effective scrutiny of directors. Humans are often cooperative for no apparent self-advantage. They can be persuaded of a common good beyond the pursuit of profit. While the participatory aspect of a shareholding democracy is seen as a virtue in itself, the runaway executive pay in the US is a vivid illustration of a wider failure. Venerating technocratic elites is bad for society. Flush with cash from desperate investors, they can draw on huge resources to fund pet projects of little civic importance or blow cash on “moonshot” projects. They can indulge their techno-libertarian bent with bizarre ideas of independent floating city-states on enormous ships or plan an escape to new worlds via rocketships. What we end up with is a weird world where we think not only that technologists make money better than anyone else but that they are also best placed to spend it in the interests of humanity. This is frankly dangerous in the US, where the very richest have such a big say on the speed of policymaking and the direction it takes.